Question

is there a potential problemif governments continually finance goods and services by borrowing money

Answer 1

Yes. It puts the country in debt. If a country winds up "borrowing" money, they would wind up owing more money than they can produce.That's the thing with borrowing, you have to pay it back, and usually with interest.

Answer 2

That's what governments are doing all the time by emitting government bonds. The Ricardian Equivalence says that there is no difference between financing goods and services via taxes or borrowing. In an open economy where you borrow from abroad it gets more complex. In general there is no problem as long as the government can finance the back payment by its tax income. The potential problem is a situation where this is not the case anymore.

Answer 3

thank you :)