top-rated free essay

Eco.372 Week 4: Team a

By SchuylarR1 Sep 18, 2013 1138 Words
Who Bears The Burden of Debt?
September 12, 2013

Who Bears The Burden of Debt?
When hearing the word “debt” many individuals may cringe to the sound of the word. The United States debt has increased tremendously in the past few years with a record 10.7 trillion in 2008. The debt continues to grow year after year making taxpayers poorer and foreign holders of the United States bonds richer. The more increase on expenditures and less GDP the United States generates will cause interest rates to go up to pay for bonds exchanges. Future generations will not be able to carry on the burden of debt because lack of knowledge and not enough time to decrease it. The Introduction of Debt Burden

Debt Burden can be a stressful issue nowadays. When one think about debt burden one will simply think of it as money owed to a person, company, or country. The Economic definition is the cost of servicing debt. Debt burden affects consumers and countries. The consumer debt can come from house mortgages, interest rates, credit cards, loans, and bad investments. A country debt burden is the cost of servicing the public debt. A country debt burden may be caused by Social Security or state retirement programs and can cause imports to be more expensive, higher taxes, and cost 25% of The United States debt to be held abroad making The United States liable for external interest transfers ("Economics Help Helping To Simplify Economics," 2013). Also countries can be in debt with one another.

Government Debt and Individual Debt
The government has suffered years of long-term debt because of budget deficits and the rising of the federal debt in relation to the GDP. Four factors contribute to government debt. One factor is contributed by the economic choice of spending. The growth in the government’s debt is not driven by assistance from foreign countries, funding, or defense as politicians suggest, but by its choice of entitlement spending. The unrestricted spending has declined as a share of the GDP over the years, whereas entitlement spending has increased. Second, consolidation is sought by decreasing government spending, and economic restructuring worldwide effectively has reduced debt-to-GDP ratio. An example is compared to the United States where there is little emphasis on spending restraint. Third, the choice of increasing revenue by increasing the taxes on the wealthy have only a minimal affect on the economy. The income tax is not organized well enough to gain much revenue. Finally, the United States can maintain the economy’s safety net, which without breaking the financial bank by changing its notion on entitlements. This can be done by reducing social security’s unfunded liabilities and gradually increasing the age, which benefits are collected, and slow the benefit growth for those Americans who better off.

Individual (consumer) debt is debt used to fund spending rather than savings. This includes debts that incur based on purchasing goods, which are not consumable, or those that cannot appreciate. The most common source of consumer debt is credit cards, payday loans, and other consumer finance with high interest rates. There are also consumer debts known as long- term, which is considered useful investments, such as homes or automobiles (consumer goods), which are usually not considered a consumer debt, for example, a television set.

America’s Debt to Income Ratio as Compared with Other Countries
Every time a conversation flare up there is always a conversation about how bad the United States economy. This appears to be a false statement about the economy because the citizen of America is still living above their mean. American always has been the scapegoat when the economy is looking bad. American Citizen acted surprise when the statistics came out for the comparison of the United States against the other nations.

The international Monetary Fund is very accuracy because of the market research done by the financial analysis. The International Monetary Fund is used to measure the 10 wealthiest nations in the world (in terms of GDP). The United States came in first and Japan was second, followed by Germany, China, United Kingdom, France, Italy, Spain, Canada, and Brazil.

Usually the nation that produce the more GDP is the nation that spend more to make up this GDP. The same goes to individual, the more they make, the more they spend out in the economy. There are many factors to consider for a nation debit, which include the sum of the citizen’s outstanding consumer debit and any other financial factors and also included loans, trade deficits, and budget deficits.

United States, United Kingdom, Germany, France, Italy, Netherlands, Span, Ireland, Japan, and Switzerland are the 10 top debtor in the nation, this came from the CIA World Fact book.

Interest Rates and Debt Burden
The United States debt burden has become so large that their interest costs on an annual basis have outgrown their Gross National Product (GNP). Their debt problem at some point will be a problem for the American people, either through cuts in social and government programs or higher tax burdens for the younger generation. The majority of interest is paid to treasury notes and bond, foreign domestic notes and bonds, state and local government securities, and savings bonds. Continuing to increase the debt without taking in matching revenue will have an enormous impact on their debt burden, recession recovery, and economic growth.

Projections for the Deflict
The projection for the deficit by the Congressional Budget Office (CBO) is expected to fall to $845 billion this year. In the last five years, this is the first reading that fell under $1 trillion. The CBO estimates that the deficit for 2014 falls to $616 billion and $430 billion in 2015. The CBO also assumes that unemployment rates for 2013 would be 8%, and are expected to decrease by .4% in 2014. The estimation by the CBO for the GDP growth is 1.4% in 2013, which is assumed to accelerate to 3.4% by 2014.


America's Debt to Income Ratio as Compared with Other Countries
Colander, D. C. (2010). Macroeconomics (8th ed.). Retrieved from Economics Help Helping To Simplify Economics. (2013). Retrieved from

Eleven O’clock Associates, LLC . (2013). Retrieved from http://current-economic-conditions-


Ro, S. (2013, February 5). Business Insider. Retrieved from Still on the Cliff. (2013). Retrieved from

Cite This Document

Related Documents

  • Eco 372

    ...Eco/372 Final Exam ECO/372 Final Exam Study Guide How to Use this Study Guide – READ ME FIRST The following study guide will NOT have the same exact questions on your test! However, this study guide WILL help you ace the ECO/372 Final Exam. The guide covers the same topics and will help you gain a deeper understanding of the concepts. Bes...

    Read More
  • Eco 372 Week 4 Reflection

    ...Week Four Reflection Team A will discuss the objective, which consist of analyzing the influence of the debt in the United States economy, and explain the impact that surplus and deficits has on the health of the United States macroeconomy. To analyze the influence of the deficit, surplus, and debt on the health of the United Sta...

    Read More
  • Eco 372 Week 4 Paper

    ...Be Intelligent—Identify the Stakeholders You’ve identified the issue, and your ultimate goal is to take an action that will solve or address that issue. But we can’t skip right to the end just yet! Before thinking about the solution, consider the other people in the situation. Your decision—even if that decision is to do nothing—wi...

    Read More
  • eco week 4

    ... INDIVIDUAL NEWS ARTICLE CARLOS GOMEZ ECO/372 3/03/2014 DARYLL BAKER INDIVIDUAL NEWS ARTICLE The news article I would like to talk about is Real Estate and Rates. Real Estate is the heart of the economy for the United States of America. Lot of businesses and jobs relay on the Real Estate market. The way the Real Estate m...

    Read More
  • Eco 372 Week 4

    ...Island, 2010), which I saw his name on the official documents when I was there on an 8th grade field trip in 2010. My father’s grandmother, whom they call Nani in Polish, came to America in 1903. My Dzadzi was born in Chicago; Illinois in 1933 he served in the United States Army during Korea and was a highly decorated combat veteran. After h...

    Read More
  • Team Deliverable Week 4

    ... Learning Team Deliverable Week 4 Learning Team D – Walter Branch, Ramon Castillo, Barbara Farve, Kristofer Genilo ECO/561 – Economics 11/24/2014 Peter Oburu Measuring Domestic Output and National Income – Ch. 24 Topics comfortable Kris is comfortable with the concept of gross domestic product (GDP) as it is the dollar valu...

    Read More
  • ECO 372 Week 5 Summary

    ... This file comprises ECO 372 Week 5 Learning Team Fiscal Policy Paper General Questions - General General Questions Discuss within your Learning Team how and why the U.S.’s deficit, surplus and debt have an effect on the following: ·  Tax payers ·  Future Social Security and Medicare users ·  Unemployed indivi...

    Read More
  • Eco 372 Team Paper

    ...International Trade and Finance Speech ECO/372 - Principles of Macroeconomics May 13, 2013 Foreign Exchange Rates One may try to understand what exactly a foreign exchange rate is. To help understand, let’s view a foreign exchange rate as exchanging one dollar a...

    Read More

Discover the Best Free Essays on StudyMode

Conquer writer's block once and for all.

High Quality Essays

Our library contains thousands of carefully selected free research papers and essays.

Popular Topics

No matter the topic you're researching, chances are we have it covered.