Some argue that if a government runs a budgetary deficit, it is a drag on the public finances because taxpayers must fund interest payments to external creditors.

If the interest payments were an issue, we might expect governments to stop borrowing when in surplus.

But a budgetary surplus won't reduce demand for government bonds.

So what, in practice, do governments do?



Your Answer

By clicking “Post Your Answer”, you agree to our terms of service and acknowledge you have read our privacy policy.