Question
- Question: Explain these questions: 1.What is the origin of the debt in Brazil? 2.Why does debt exist in Brazil? 3.Who is responsible for the debt in Brazil?Explain these questions:
- 1.What is the origin of the debt in Brazil?
- 2.Why does debt exist in Brazil?
- 3.Who is responsible for the debt in Brazil?
Answer
1.What is the origin of the debt in Brazil?
During the 1995 to 1998 period, the net public debt of the consolidated public sector in Brazil increased from 28.5 percent to 42.6 percent of GDP. This dramatic growth has raised many doubts about the sustainability of the current economic policy in the country. These concerns have been further increased by the exchange rate devaluation of January of 1999, which raised even more the stock of the domestic public debt–due to the existence of dollar-linked indexation clauses on part of the debt–, as well as the stock (in R$) of the foreign debt. The concerns about sustainability have been compounded by those related to the very short maturity of the domestic public debt, which increased the vulnerability of the country
1.What is the origin of the debt in Brazil?
government debt increases as a result of government spending, and decreases from tax or other receipts, both of which fluctuate during the course of a fiscal year. Historically, the US public debt as a share of gross domestic product (GDP) has increased during wars and recessions, and subsequently declined.
3.Who is responsible for the debt in Brazil?
Politicians and their voters become addicted to deficit spending. It’s called expansionary fiscal policy. The government expands the money supply in the economy. It uses budgetary tools to either increase spending or cut taxes. That provides consumers and businesses with more money to spend. It boosts economic growth over the short-term.
Here’s how it works. The federal government pays for things like defense equipment, health care, and construction. It contracts with private firms who then hire new employees. They spend their government-subsidized wages on gasoline, groceries, and new clothes. That boosts the economy. The same effect occurs with the employees the federal government hires directly.
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