Which of the following concerns about the national debt are substantive? Check all that apply.

A. Government's borrowing to refinance the debt may lead to higher interest rates. Higher interest rates reduce investment spending, leaving future generations with a smaller stock of capital goods.

B. Paying off the U.S. national debt will require future generations of Americans to decrease their purchases of goods and services by an amount equal to the existing debt.

C. As government securities mature, portions of the national debt come due. When this occurs, the only way for the government to obtain the necessary funds is to raise taxes or cut expenditures.

D. The large U.S. national debt is in danger of bankrupting the federal government.

Question

04-05-2020
Business

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Which of the following concerns about the national debt are substantive? Check all that apply.

A. Government's borrowing to refinance the debt may lead to higher interest rates. Higher interest rates reduce investment spending, leaving future generations with a smaller stock of capital goods.

B. Paying off the U.S. national debt will require future generations of Americans to decrease their purchases of goods and services by an amount equal to the existing debt.

C. As government securities mature, portions of the national debt come due. When this occurs, the only way for the government to obtain the necessary funds is to raise taxes or cut expenditures.

D. The large U.S. national debt is in danger of bankrupting the federal government.

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Parrain Parrain · Answer 1 · 2020-05-05T07:24:06+02:00

Answer: A. Government's borrowing to refinance the debt may lead to higher interest rates. Higher interest rates reduce investment spending, leaving future generations with a smaller stock of capital goods.

Explanation:

When the Government replaces a debt with another debt by means of Refinancing, they will probably be charged a higher interest rate because replacing debt with another debt is not generally ideal.

A higher interest rate means a higher repayment amount. Should the government keep paying higher and higher rates for debt, they'll have to reduce their spending on Investment. Investment creates Capital Goods such as machines and equipment. A reduction in Investment spending therefore reduces future generations' access to capital goods.