THE GLOBAL ECONOMY_2 Essay Example | Topics and Well Written Essays - 2500 words

THE GLOBAL ECONOMY_2 - Essay ExampleIn the last few years, however, this has changed dramatically. Rising government debt, and indeed, the economic health of some(prenominal) nations, is now at the center of the public policy debate. The results of the recent national election in Britain, was in part, a reflection of public dissatisfaction with the state of the parsimony and the growth in the level of debt under the Labour Partys administration.As long as deficits are kept at manageable levels and as long as the economy experiences growth, there is no need for concern. The question, of course, is what constitutes manageable and what level of economic growth is sufficient to honour the repayment of the debt? Economists prefer to figure out a measure of debt as a partage of Gross Domestic Product (GDP) because it is a reliable indicator that controls for the size of the economy. For example, if the U.K.s debt is five percent of GDP in a given year and Denmarks debt ratio is nine pe rcent of GDP, we have a reasonably accurate means of examining the proportional debt level even though the economic output of each country is different.The International Monetary Fund data shows that during most of the 1990s, the annual debt to GDP ratios for Britain and the joined States averaged between three and five percent http//www.imfstatistics.org. This was considered acceptable because the economies of the two countries were growing at between four and six percent per year. In 2010, the Congressional work out Office estimates the debt to GDP ratio for the US at 9.9% of GDP while economic growth is estimated at 3.2 percent http//www.cbo.gov. The Statistics Office estimates that the debt to GDP ratio for the U.K. in 2010 at 10.6% of GDP with economic growth forecast at 3 percent http//www.statsitics.gov.uk. The current debt to GDP ratios for both countries are clearly unsustainable. Warnings have tardily been issued to the U.K. that the countrys credit rating may be lowere d over fear