Question

(i) Define Public debt. 
(ii) What are Redeemable debts?
(iii) Mention two examples of unproductive debt.

Answer 1

(i)

When the planned expenditure of the Government exceeds the total revenue of the Government, then the Government needs to borrow money from individuals and organisations. This is called public debt.

(ii)

Redeemable public debt is the debt that the government promises to pay off at some predetermined future date. The government regularly pays interest on this debt. The principal amount is paid back on the expiry of the due date. Therefore, in the case of redeemable debt, the government has to make some arrangements for its repayment. Public debts are normally redeemable.

(iii)

• Loan raised for war.
• The loan raised for floods.