House of Cards? Concerns Mount Over Rising Household Debt

The video explores the relationship between household debt and economic performance, highlighting that a rapid increase in household debt often precedes slower economic growth. This pattern is not only evident in the 2008 recession in the US but also historically across many advanced economies. The discussion extends to various countries, including Scandinavian nations, Japan, and China, emphasizing the global relevance of this issue. The video further explains the mechanism by which high household debt impacts the economy, focusing on fluctuations in aggregate demand and the challenges economies face in substituting demand once the borrowing cycle ends.

What is the main finding about household debt discussed in the first section?

• It is a recent phenomenon unique to the US.

• It has historically been a global issue in advanced economies.

• It only affects developing countries.

• It is unrelated to economic performance.

Which countries are highlighted for their pre-crisis household debt buildup?

• Only China

• Scandinavian countries, Japan, and China

• Only European countries

• Only the United States

What is a key concern about household debt in China?

• It has no impact on the economy.

• It is decreasing rapidly.

• It is increasing rapidly.

• It is stable and well-managed.

What is one theoretical explanation for the link between high household debt and poor economic performance?

• High debt leads to increased savings.

• High debt always leads to economic growth.

• Debt has no impact on economic cycles.

• Debt cycles create fluctuations in aggregate demand.

Why do economies struggle when the demand created by household debt decreases?

• They have strong alternative demand sources.

• They can easily replace the demand.

• They have difficulty substituting the lost demand.

• They do not rely on household debt.