How Is Public Debt Related to Economic Growth and Unemployment?

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How is public debt related to economic growth and unemployment?

In this project different economics variables will be compared with each other to see if any correlations between them exist to perhaps explain certain trends and changes in the variables. The three focused on in this report are GDP growth, Government Debt and Budget surplus/deficit.

There is a huge standard deviation in the data given for GDP. In both 2009 and 2010 the standard deviation was over four and a half times larger than the average of GDP itself. This will make it hard to create general assumptions for all countries to assess whether different factors correlate with each other. Even other factors such as GDP growth have relatively large standard deviations. GDP growth has a very large standard deviation. An example of ambiguous data can be seen when comparing Canada and India. They both had fairly similar GDP and debt figures in 2010 but India’s GDP growth was around three times that of Canada’s. This shows that we cannot make pure assumptions on the links between different factors but we may be able to make a general connection.

Figure 1:

As we can see from Figure 1 distribution of GDP growth is relatively small, with 93.4% (171/183) countries having a growth between 0% and 10%. If we then look at Figure 2 we see that Government Debt is much more spread out compared to GDP growth. This shows that very few countries are able to achieve very high economic growth and few produce negative growth, but the majority of countries have a steady rate of GDP increase.

Figure 2:

The spread of Government debts however is much vaster. Whereas growth is relatively easy to influence and control, debt is a by-product of creating growth for the economy. Some countries may achieve growth more efficiently than others. There may be factors such as corruption, location, difference in sizes of public sectors, and may other determinants that may affect the level of debt.

Comparing GDP growth...
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