Which of the following is a valid concern about the national debt for a country whose debt is held entirely by its citizens?
A) The welfare of future generations will be directly related to the per-capita size of the national debt that they inherit.
B) Growth of the national debt will eventually lead to the bankruptcy of the government.
C) When the debt comes due, future generations may be unable to pay it off.
D) If the increases in the national debt reduce private expenditures on capital formation, future generations may have lower incomes because they will inherit a smaller stock of capital.

Question

Quizplus · Accepted Answer

If the national debt reduces private expenditures on capital formation, future generations may have lower incomes because they will inherit a smaller stock of capital. This can lead to reduced economic growth over time and lower living standards for future generations. The other options are not as applicable when the debt is held entirely by citizens, as bankruptcy or default are unlikely and future generations will be responsible for paying off the debt regardless.

Which of the Following Is a Valid Concern About the National