Imagine you have a piggy bank, and instead of saving money for later, you take out more than you have, like borrowing from your neighbor to buy candy. That's what countries do when they borrow too much money, and it can cause problems if they don't pay it back.
Examples
- A family takes out a loan for a new car and now has to make monthly payments.
- Your school gets more students, so it asks the town for extra money, like borrowing, to build a new playground.
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See also
- What causes economic inflation and why is it sometimes hard to control?
- How Does the Economy React to a Global Pandemic?
- What is rebalance?
- How do sanctions affect a country's economy and its global trade?
- How do credit cards function and what makes them secure?
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Categories: Economics · debt,government finance,economic policy