What happens to the public budget balance (PBB) when public debts are issued?
Understand the Problem
The question is asking about the effect of issuing public debts on the public budget balance (PBB), including the potential changes in PBB and interest payments associated with such debts.
Answer
Increase in budget deficit
When public debts are issued, it typically leads to an increase in the public budget balance deficit because the government is borrowing money to cover its expenses.
Answer for screen readers
When public debts are issued, it typically leads to an increase in the public budget balance deficit because the government is borrowing money to cover its expenses.
More Information
Issuing public debt means the government borrows money, increasing its liabilities. This results in an increase in the budget deficit since the government is spending beyond its current revenue.
Tips
A common mistake is confusing the budget deficit with the national debt. The deficit refers to the shortfall in a single year, while the national debt is the cumulative total of all deficits.
Sources
- Government Budget Deficits and Government Debt - Econlib - econlib.org
- Policy Basics: Deficits, Debt, and Interest - cbpp.org
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