A Public Debt That Is Owed to Foreigners Can Be

question 112

Multiple Choice

A public debt that is owed to foreigners can be burdensome because

• A)foreign interest rates are persistently higher than domestic interest rates.
• B)the payment of interest reduces the volume of goods and services available for domestic uses.
• C)the payment of interest will conflict with a nation's foreign aid programs.
• D)the payment of interest will necessarily have a deflationary effect on prices in the paying nation.

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Definitions:

Interest Expense

The cost incurred by an entity for borrowed funds; it is a non-operating expense shown on the income statement.

Straight-line Amortization

A method of reducing the carrying amount of an intangible asset over a fixed period of time in a systematic and rational manner.

Premium Amortization

The gradual expense or reduction of the premium paid above the par value of a debt security over its remaining term.

Interest Expense

The charge an entity bears for the funds it has borrowed over a set period.