Economics Real Vs Nominal Gdp Questions
Government debt can have both positive and negative effects on real GDP. On one hand, government debt can stimulate economic growth by financing public investments and infrastructure projects, which can increase productivity and output in the long run. This can lead to an increase in real GDP.
On the other hand, excessive government debt can have negative consequences for real GDP. High levels of debt can crowd out private investment by increasing interest rates, which can discourage businesses from borrowing and investing in new projects. This can lead to a decrease in real GDP growth. Additionally, high levels of government debt can also result in higher taxes or reduced government spending, which can further dampen economic activity and hinder real GDP growth.