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# Unfunded Debt

## Definition

Debt obligations that are contracted without being backed by specific funds
or revenues set aside for their repayment, typically consisting of short-term
obligations and arrears that must be paid from current revenues or new borrowing.

## Source Chapter

Book V, Chapter 3

## Context

Smith distinguishes between funded and unfunded debt as two methods by which
governments contract debt, with unfunded debt being the first resort when
governments borrow without creating dedicated revenue streams for repayment.

## Economic Domain

Regulation

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