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Mar 6
1. Interest payments: Governments must pay interest on the public debt, which can be a significant burden on the national budget. This can lead to higher taxes or cuts in government spending on essential services.
2. Crowding out private investment: When the government borrows money from the public, it can crowd out private investment by increasing interest rates and reducing the availability of credit for businesses and individuals.
3. Inflation: If the government prints money to finance its debt, it can lead to inflation as the increased money supply reduces the value of the currency.
4. Economic instability: High levels of public debt can lead to economic instability, as investors may lose confidence in the government's ability to repay its debts. This can lead to a financial crisis and a decrease in economic growth.
5. Inter-generational equity: Public debt can transfer the burden of repayment to future generations, who may not have benefited from the spending that incurred the debt in the first place. This can create inter-generational equity issues and place a burden on future taxpayers.
2. Crowding out private investment: When the government borrows money from the public, it can crowd out private investment by increasing interest rates and reducing the availability of credit for businesses and individuals.
3. Inflation: If the government prints money to finance its debt, it can lead to inflation as the increased money supply reduces the value of the currency.
4. Economic instability: High levels of public debt can lead to economic instability, as investors may lose confidence in the government's ability to repay its debts. This can lead to a financial crisis and a decrease in economic growth.
5. Inter-generational equity: Public debt can transfer the burden of repayment to future generations, who may not have benefited from the spending that incurred the debt in the first place. This can create inter-generational equity issues and place a burden on future taxpayers.
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