How_Money_Works_-_The_Facts_Visually_Explained

Public debt

Public debt is the total amount of money owed by a country’s

government, and includes historic debt. Nations with big economies and

large tax-paying populations can carry more debt than those without.

31 %

of total global debt

is owed by the US

How it works

The total amount borrowed by a country’s government

(and by its previous governments) is known as the

public or national debt. This is generally calculated as

the total debt minus the government’s liquid assets.

Interest is due on this debt, and it can be substantial.

If a government spends more than it collects in taxes

Big economy

A larger economy,

such as the US,

can safely carry a

larger debt, since it

has more capacity

to raise taxes.

in one year, it will be in deficit. Any money it borrows

to cover this is then added to the public debt. When

the government spends less than it collects in taxes in

a year, it has a “surplus,” which can be used to pay

down the debt. Inflation can also help reduce a debt

burden. A state that becomes unable to pay its debt is

said to “default,” and will find it hard to borrow again.

DEBT

Carrying debt

Governments usually repay debt using

taxes. The more money they raise, the

faster they can repay it. The larger

a country’s economy, the more debt

it can safely hold, since a bigger economy

can gather more taxes.

Medium

economy

A smaller

economy can

only support

lighter debts.

DEBT DEBT

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