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How did foreign debt arise?
Evaluation: Borrowing shows an injection of new resources in the domestic economy and also an opportunity for development.
• When borrowed resources are used to raise productive capacity, in that case the loan and interest repayments can be met through economic growth.
• When the loan is used to finance current account deficits in that case there is no net investment as well as future economic growth. Debt is a burden.
Assume that national income is initially at its equilibrium level when desired investment falls. We would expect an enhance in national income by an amount equal to the decreasing
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What is Frugal Economy
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