Solution

The following examples show that governmental debt does indeed have an impact on the entire economy.
i. Negative Effect on Investment and Productivity: To pay off debt, a government may impose taxes or issue new currency. However, this limits people's capacity to work, save, and invest, which hinders a nation's progress.
ii. Government transfers the cost of reduced consumption to future generations. Larger government borrowing in the present results in higher taxes being imposed in the future to pay off debt. Younger generations pay higher taxes, which lowers their spending, savings, and investments. Therefore, growing public debt is detrimental to the wellbeing of coming generations. iii. Reduces Private Investment: The government encourages more investment by raising interest rates on bonds and securities. Therefore, a disproportionate amount of people' savings go to the government, which discourages private investments.
iv. Drains National Wealth: Repaying loans taken out from foreign nations and institutions causes the wealth of the nation to decrease.