If a Government Issues an Excessive Amount of Debt Then

question 54

Multiple Choice

If a government issues an excessive amount of debt then

• A) it doesn't matter because the national debt need never be paid back.
• B) the financial markets will perceive that the risk of the government concerned defaulting on its loans has risen and will demand a higher rate of interest to lend to that government.
• C) the financial markets will perceive an increased opportunity for profit and reduce the rate of interest demanded to lend to that government.
• D) other governments are likely to do the same.

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Definitions:

Spoils System

A practice where a political party, after winning an election, gives government jobs to its supporters, friends, and relatives as a reward.

Federal Civil Service

Employment sector composed of federal government employees who are appointed based on merit rather than political affiliation.

Federal Bureaucracy

The collection of government agencies and departments that carry out policies and administer public programs at the national level.

Appointing Officials

The process of choosing individuals to hold specific positions of authority in organizations, often within the government.