How To Guide For: A Look At The National Debt -- What It Is And How It Works

National debt is defined as the total outstanding borrowings of a central government comprising internal (owing to national creditors) and external (owing to foreign creditors) debt incurred in financing its expenditure. National debt is divided into three categories: Floating debt (which is continuously refinanced short-term debt for a company's ongoing operations), Funded debt (which are funds raised through issuance of securities such as bonds. Sometimes long-term loans are also called funded debt) and Unfunded debt (which is short-term debt that is required to be repaid within a year from issuance). Around the world, national debt is known as: government debt, public debt, federal debt, and even sovereign debt. National debt is a very important element of a country's financial system. Now that we know what national debt is lets take a look at how it works. Every year in which the government runs a deficit, the money it borrows is added to the federal debt. If the government runs a surplus, it can use the extra money to pay down some of its debt. Also each year, the government pays interest on the national debt as part of its overall spending. To get more information on national debt click on the pictures below to read the articles.