Question

Distinguish between funded and unfunded debt.

Answer 1

	Funded debts		Unfunded debt
(i)	Funded debts are for long term periods, and their payment is made after a year.	(i)	Unfunded debt is for a short period say less than a year.
(ii)	The government creates a debt fund in order to repay this debt.	(ii)	Government does not create any separate fund to repay this debt.
(iii)	In this, on the maturity of fund the debt is repaid.	(iii)	Treasury Bills are paid off within a year. So, it comes as an example under unfunded debt.