What do we often misunderstand about the definitions of national debt, deficit spending, inflation, and recession? What do we not understand about these macroeconomic concepts and their impact on individuals and business?

The National Debt is the amount of money that the government borrowed from its creditors, domestic or foreign. Deficit spending is when government spending exceeds government revenues, and is often financed by borrowing. These two are often misunderstood by the public due to the negative connotation attached to debt. However, national debt and deficit spending, provided it is kept within what is reasonable and manageable helps the economy grow. Government spending contributes to economic growth with a portion of it being financed by debt. It is, however, important to note that these are paid by tax payers (present and future tax payers) money.

Inflation is the general increase in the prices of commodities. It is an average rate of increase which means that some commodities may see a higher rate of price increase than the others. Inflation is also often misunderstood due to the negative perception attached to higher prices. However, inflation often comes with economic growth and when kept within target, is simply a sign of a healthy economy. Individuals and businesses usually feel inflation in relation to their purchases of commodities and their income.

Recession is a series of contraction in the economy. Specifically, an economic contraction that lasts for two periods (quarters) or more is called a recession. A single period contraction is often misunderstood as a recession. Recession affects individuals and businesses as it usually indicates a decline in income and higher unemployment.