Maintaining fiscal sustainability is a key challenge for modern governments. When tax revenues fall short of public expenditure, the government must borrow to finance the gap. Over many years, these accumulated deficits build up, resulting in a substantial national debt.
In the wake of recent supply-side shocks and energy subsidies, the country's national debt has risen to over 95% of GDP. This has sparked intense debate among policymakers. Some argue that high national debt limits a nation's capacity to respond to future crises and crowds out private investment. Others suggest that during periods of low interest rates, government borrowing for capital projects is a rational strategy to boost long-term productive potential.
Defining the relationship between flow concepts like annual borrowing and stock concepts like accumulated debt is crucial for evaluating long-term fiscal health.
Define the term 'national debt' (Extract F, line 4).
245 exam-style questions on AQA A Level Economics 2.5 Fiscal policy and supply-side policies, covering 2.5.1 Fiscal policy and 2.5.2 Supply-side policies. Each one has a worked solution and a mark scheme showing where the marks go.