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Printable Handouts
Navigable Slide Index
- Introduction
- Debts and deficits
- Absolute and relative debt
- Debt-GDP ratios, international comparison
- Debt taxonomy
- Total U.S. indebtedness as percentage of GDP
- A brief history of national debt
- Sovereign debt differs from household debt
- Modern Monetary Theory
- Illustrating crowding out
- Evaluating crowding out
- Interest payments on debt
- Debt and the foreign sector
- The twin deficits
- Output-income-spending flow
- Trade deficits and foreign debt
- Output-income-spending flow: ratios
- U.S. twin deficits as percentage of GDP
- Persistence of budget deficits
- Alternative 1: Economic stimulus
- Alternative 2: Austerity
- EU deficits and debt levels in 2016
- Budget-economy trade-off
This material is restricted to subscribers.
Topics Covered
- GDP
- Modern Monetary Theory (MMT)
- Crowding out
- Interest
- Twin deficits
- Austerity
Talk Citation
Torras, M. (2024, October 31). Debts and deficits [Video file]. In The Business & Management Collection, Henry Stewart Talks. Retrieved June 11, 2025, from https://doi.org/10.69645/VJQO7988.Export Citation (RIS)
Publication History
Other Talks in the Series: Introduction to Macroeconomics
Transcript
Please wait while the transcript is being prepared...
0:00
Hi. My name is Mariano Torras.
I'm professor of economics
at Adelphi University,
in New York.
We're going to be doing
a lecture series
on macroeconomics.
0:14
In the preceding lecture,
we learned that if a
government spends more money
than it raises from taxes,
it incurs a deficit.
When it does so, the only way
to finance the deficit
is to borrow money.
All national governments
borrow money
by issuing bonds of
varying durations.
The total of all the government
bonds outstanding, then,
is the same thing as
the nation's debt.
A national debt is
always a concern,
since it requires the
government to pay interest
to its bondholders.
As we saw earlier, the
interest is a transfer payment
that reduces the ability
of the government
to conduct its other functions,
1:01
but the importance of the
size of the national debt
is also sometimes overstated.
We should always pay more
attention to the debt
as a percentage of GDP,
rather than the absolute
size of the debt,
since the debt-GDP ratio
gives us a sense of
the ability of the country
to service its debt.
For example, the national
debt of the United States
is in the neighborhood
of $25 trillion,
which sounds like
quite a lot of money.
It is, of course,
but its GDP is not much
less, about $20 trillion.
Japan, in contrast, has
a slightly smaller debt
than the United States,
but far less than half its GDP.
This means that its
debt-GDP ratio,