Question

Does public debt impose a burden? Explain.

Answer 1

Public debt can impose a burden in the following cases: (i) When government has imposed new taxes or raised the existing tax rates to redeem the debt; (ii) When debt is to be redeemed through printing of new currency. In such case, it would cause inflationary trends in the economy; (iii) When public debt is taken for war purposes or debt is used in an unplanned manner.