Question

What is the role of public debt in economic development of an economy?

Answer 1

In many respects, public debt plays a major role in the economic development of less developed nations.

1. It encourages propensity to save.
2. It helps capital formation for economic development.
3. It helps to control inflation.
4. It can be repaid out of the increased national income.
5. Useful for meeting emergencies and war expenditure.
6. Better allocation of resources.
7. Useful for social services.