Which of the following is TRUE of the portion of the net public debt held by foreign residents?
A) It will definitely be a benefit to current and future generations of U.S residents, because foreign residents have shown a willingness to lend to the U.S. government in exchange for rates of return significantly lower than they can receive elsewhere in the world.
B) It will definitely be a burden on current and future generations of U.S. residents who will have to pay interest on this portion of the debt, thereby transferring a portion of future U.S. incomes abroad.
C) It will be a burden on future generations of U.S. residents only if funds that the U.S. government obtains from borrowing are expended on projects with rates of return lower than the rates of interest that the government pays foreign residents.
D) It will be a benefit to future generations of U.S. residents only if funds that the U.S. government obtains from borrowing are expended on projects with rates of return lower than the rates of interest that the government pays foreign residents

Question

Quizplus · Accepted Answer

The net public debt held by foreign residents will be a burden if the borrowed funds are used on projects with returns lower than the interest rates paid, as this would mean a net loss for the U.S. economy.

Which of the Following Is TRUE of the Portion of the Net