Question

Which of the following best describes a country’s external debt? It is the portion of the total national debt that is financed by foreign bondholders. It is the portion of the public debt financed by domestic bondholders. It is the portion of the public debt financed by foreign bondholders. It is the portion of the annual fiscal deficit financed by foreign bondholders.

Answer 1

Answer:

It is the portion of the public debt financed by foreign bondholders.

Explanation:

By definition, a country's external debt is the amount of public or government debt that is owed to foreign creditors. Generally the words public, national or sovereign debt are used as synonyms, so the first option would generally be accepted as correct also.

Public debt exist since government run on deficits, i.e. they spend more than what they receive, so total public debt is basically the accumulation of public deficits over history.