explain how the federal government finances and services its outstanding debt and how the federal deficit is a burden on future generations.
In order to meet its expenditure, every government takes several types of loans. This is known as public debt. It includes both external borrowing and internal borrowing. The debts are the sum of all debts which are outstanding owned by the federal government. The government borrow money to finance its budget deficit which occurred when the expenditure of government exceeds the revenue. When the government borrows, it gives government securities to creditors stating the term of loans about the principal amount and interest payment and date of paying loans.
The government finance or services its outstanding debt by taking more loans or by increase tax. Sometimes the government paid its outstanding by issuing more loans when the date of paying outstanding debts reaches its end. To take new loans, the government sell the transferable securities in the market, it borrows from the public sector and private sectors. Sometimes it borrows money from the international organisation and banks such as the World Bank. Sometimes the government paid its outstanding debts by raising the tax in the country and by using those taxes to pay its debts.
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