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Question from Economics of public revenue The government made a plan to borrow 1 trillion baht...

Question from Economics of public revenue

The government made a plan to borrow 1 trillion baht to fight COVID-19. Will this debt become a burden of future generation? Apply 2 models of your choice to explain your answer.

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Answer #1

As per debt trap models such high government borrowing leads to inability to repay and leads to high debt to GDP ratio and thus bubble of debt crashes causing recession.

As per crowding out effects, increased government spending leads to low private spending and thus the debt of government rises so high that it is unable to pay back sovereign bonds of AAA ratings as well and causes huge burden of debt on future generations.

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