PSCI283 Lecture Notes - Lecture 9: Debt Relief, External Debt, Capital Account
16 Dec 2019
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Two options: adjust to it often have consequences, finance the debt most popular option. Adjustment measures: monetary policy the use of the money supply and or the interest rate to influence the level of macroeconomic policy. Making it more expensive by increasing interest rates: fiscal policy any macroeconomic policy involving levels of government purchases, transfers, or taxes, usually implicitly focused on domestic goods, residents or firms. External measures decreasing amount of money coming into the country. increasing tariffs so foreigners pay more. Internal measures higher taxes, interest rates to reduce spending by individuals, businesses and the government. Financing: borrow from external sources or decrease its foreign exchange reserves, often the preferred option when access to credit is available. External debt the total of public and private debt owed to non-residents by residents of an economy. The organization and functioning of monetary and financial systems have been determined by various political rationales relating to the pursuit of power, ideas, and interests.
