Economics.docx - Introduction Recently there is a general...

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Introduction Recently, there is a general increase in debt for Malaysia government. This assignment is carry out to determine the background and the definition of the government debt. Through this assignment, the current scenario of government debt can be figured out in this case, the effects of the rising government debt can be determined. Therefore, a series of solutions are figured out, in order to solve this problem. After identifying and formulating the current scenario problems and solutions, the objective of this assignment are formulated. What is debt? When a government spends more than it earns in revenue and runs a deficit, it needs to borrow money to cover the difference. And the accumulation of borrowing is the national debt. Of course when the government has a surplus in its budget, some or all of the surplus can be used to decrease the national debt. In Malaysia, the current national debt greater than RM668 billion according to the national debt clock. Budget deficit has the potential to boost economic growth over the short-term but will limit the economic growth over the long term for a country. Commonly, national debt as a percent of gross domestic product (GDP) is used by investors and economists to measure a country ability to make upcoming payments on its debt, thus affecting the country borrowing costs and government bond yields. A high ratio means a country isn't producing enough to pay off its debt while a low ratio means there is plenty of economic output to make the payments (Kimberly, 2017). The real value of national debt can increase if an economy experiences a period of price deflation. Internal debt is part of the total government debt in a country owed to its citizens by selling bonds or long-term credit instruments. It is a form of fiat creation of money, in which the government obtains cash not by printing it, but by borrowing it. Generally, internal debt consists of two categories, which are Bank and Non-Bank borrowing. External debt is another part of total government debt owed by overseas leasers such as banks, the International Monetary Fund (IMF), foreign companies and other creditor. External debt can act as a severe constraint on development especially
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when the interest on loans takes up a large percentage of nation’s export revenues or government tax incomes. The burden of external debt is measured by the debt-service ratio. Long-term debt, long-term liabilities, is any financial obligations that extend more than a 12-month period, or beyond the current business year or operating cycle. While short-term debt known as short-term liabilities, short-term debt refers to any financial obligations that are due within a 12-month period, or within the current business year or operating cycle.
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Current scenario in Malaysia Malaysia will be bankrupt by 2019 if it does not cut subsidies and rein in borrowings which is said by the former Malaysian cabinet minister, Dato' Sri Idris Jala (2010). To our best knowledge, the national debt kept rising. This current situation shows that Malaysia has the responsible to address this issue. Due to the
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