Sustainable National Debt
Macroeconomic Objectives
AO2·HL
Syllabus requirement
Understanding government debt as a percentage of GDP, relationship with budget deficits, and consequences of high debt.
Assessment objectives
AO2 Application and Analysis
Higher LevelThis topic is assessed at HL.
Summary
This topic explains government (national) debt, how it arises from repeated budget deficits, and why measuring debt relative to GDP matters for affordability. It describes costs of high debt — debt servicing, falling credit ratings, and the need for future tax rises or spending cuts — while noting borrowing can be useful short-term to support growth and jobs. Understanding sustainable debt helps evaluate trade-offs in fiscal policy and long-term macroeconomic stability.
