Government Deficits and Public Debt Term Paper Example | Topics and Well Written Essays - 1250 words

Government Deficits and Public Debt - Term Paper Example The reverse is a negative deficit where the outstanding government debt falls. This negative deficit is referred to as a surplus. The borrowing by a specific government issues securities to the parties holding the IOU which lays down the terms of the amount borrowed. The total amount of these IOUs equals the total of the debt that the specific government has not paid. This includes all the amounts outstanding which are inclusive of interest to be paid and the principal amount. The government debt is unlike other private accounting procedures where debt is a measurement of assets and liabilities of a government. The changes in capital are measured by capital budgeting which takes into account assets and liabilities. Several types of debts that are given out by several different governments can be divided into several ways. One way of classifying this debt is according to the specific type of government issuing the IOU. In the case of the United States, there are several divisions of government which includes Federal, state, and the local debt. This debt can, however, be classified by the period it would take to mature from the date of issue, for example, a five-year bond. The government deficit is expressed in real values rather than nominal values. This is because using nominal values would result in an overstatement of debt that is required to cover the government deficit. Moreover, the size of this government debt is measured by the debt ratio and also government debt is measured as a percentage of Gross Domestic Product. A deficit occurs in a situation where government purchases and transfers which form the government spending exceed income in form of tax receipts. To cover the deficit in su ch a case, the government must borrow. The finances of most industrial economies by the end of World War 1 were never as they are present.