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6 January, 09:36

9. What is one of the major problems caused by a large national debt?

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  1. 6 January, 10:06
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    Risk of default (no payment)

    Explanation:

    There are many risks associated to a too large national debt.

    What we considered "too large"? The size depends on national GDP (gross domestic product), as it indicates tha capability of a country to afford future payments.

    Therefore, if the fiscal balance (income - expenses) is inferior than incoming payments of interests and capital, probably the country will not be able to serve debt. So, default is unavoidable.

    High debt usually indicates that the country is expending more than its real capability, so next step should be cutting expenses in order to create cashflow and cancel debt as soon as possible.
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