Question

What arguments should be considered in assessing the burden that government debt imposes on future generations?

Answer 1

Answer:

E. All of the above.

Explanation:

A) This has happened to other countries, e.g. over 100 years ago, the US owned a very large portion of British foreign debt and it was able to influence British policies. Until that time, the British had been the largest in the world.

B) When government sell bonds, it withdraws money form the economy and increases interest rates, which in the long run will lower capital stock and hurt the economy.

C) The higher the debt level, the higher the interest that must be paid. This also applies to everyone. Imagine if you do not owe any money, and if you need to loan you have several options where to choose from. But if you are over your head in debt, banks will stop lending you money and you will have to look to more expensive sources of credit.