- national debt is the acccumulation of budget deficits over multiple years
- a budget deficit is when gov spending > tax revenue
- this is bad because it means the government will have high interest repayments
- which makes it difficult to have other government spending and still achieve a budget surplus or a balanced budget
- this can mean spending cuts on health and education
- which prevents HDI from increasing
- AD left shift
- LRAS left shift
- and also prevents economic growth as people have poor skills and poor health
- although it does not guarantee that economic development will happen, economic growth is a fundamental starting point
- link to Harrod-Domar model
- lack of savings
- lack of investment
- poor capital
- poor output and low economic growth
- low incomes
- there are some schemes that can help developing countries who are suffering from high debt
- foreign aid - developed countr
- soft loans - World Bank
- debt relief