The national debt
The national debt can be defined as the total amount of money or funds that the government owes its creditors. It can also be referred to as the accumulated level of debt that any particular government owes its lenders of funds. They include borrowing, taxes and fees, and the creation of money. Taxes and fees are the most common method of government revenue. They are in various forms, such as value-added tax, income tax, taxes on recreational goods such as alcohol, taxes on products such as fuel and flights, and also national insurance. Income tax is the tax that is deducted based on someone’s salary scale
, while value-added tax refers to the amount by which the cost of a substance has been increased by at each stage of the production process. Internal borrowing by the government is mainly through the issuance of government bonds. Mankiw (2015), defines government bonds as financial instruments that have been issued by the government to its citizens and investors with a promise of repaying the borrowed money after the expiry of the stipulated time frame plus a specific periodic interest rate referred to as coupon payments.