Analyse the impact of internal public debt on the economy.

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The impact of internal public debt on the economy can be analyzed from various perspectives, including its effect on government finances, interest rates, investment, inflation, and overall economic stability. Internal public debt refers to the government's borrowing from domestic sources, such as individuals, banks, and institutions, to finance its expenditures. Here, we will examine the key impacts of internal public debt on the economy.

1. Government Finances:
   Internal public debt affects government finances by increasing the government's debt burden and interest payments. When the government borrows domestically, it accumulates debt that must be repaid with interest over time. As the debt level increases, a larger portion of the government's budget is allocated to interest payments, reducing the funds available for other areas such as infrastructure development, education, healthcare, and social welfare programs. High levels of internal debt can lead to budgetary constraints and hinder the government's ability to meet its obligations and implement its policy agenda effectively.

2. Interest Rates:
   Internal public debt can impact interest rates in the economy. When the government borrows domestically, it competes with other borrowers for funds. This increased demand for funds can put upward pressure on interest rates. Higher interest rates can have both positive and negative effects. On one hand, higher interest rates can attract domestic and foreign investors _______ __ __ __________ ______ _____________ ____________ _____________ __________ _____ ___ ____________.
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Degree : MASTER DEGREE PROGRAMMES
Course Name : Master of Arts in Economics
Course Code : MEC
Subject Name : Public Economics
Subject Code : MEC 6
Year : 2023 2024