How can high government debt lead to slow economic growth in the future?
(i) Stock markets will weaken.
(ii) Governments may find it hard to fund other spending such as infrastructure projects.
(iii) Governments may increase future taxes to pay interest payments on rising debt.
(iv) Governments borrow funds that might otherwise have been used for investment.

Question

Quizplus · Accepted Answer

High government debt can lead to slow economic growth in the future through various ways. Firstly, stock markets may weaken due to concerns about the government's ability to repay its debt, which can lead to reduced investment and economic activity. Secondly, governments may find it hard to fund other spending such as infrastructure projects, which can limit economic growth. Thirdly, governments may increase future taxes to pay interest payments on rising debt, which can reduce consumer spending and business investment. Finally, governments borrow funds that might otherwise have been used for investment, which can lead to a lower long-term growth rate. Therefore, options (ii), (iii), and (iv) represent the most appropriate ways in which high government debt can lead to slow economic growth in the future.

How Can High Government Debt Lead to Slow Economic Growth