As the Outstanding Debt of a Nation Becomes Very Large

question 75

Multiple Choice

As the outstanding debt of a nation becomes very large relative to the size of the economy,

• A) the borrowing cost of the government will decline.
• B) lenders will have no choice but to hold the outstanding bonds and  to buy the new ones as they are offered.
• C) a country like the United States will have no choice but to default on the payments to bond holders.
• D) if the country has a central bank, it will almost certainly resort to money creation to service the debt rather than directly default.

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Definitions:

Neuropeptide Y

A neurotransmitter found in the brain and autonomic nervous system, involved in the regulation of energy balance and appetite.

Melanocortins

A group of peptides that appear to suppress appetite, leading to weight loss.

Appetite-Stimulating

Referring to substances or factors that increase the desire to eat by influencing hunger signals in the body.

Neuropeptide Y

A neurotransmitter involved in various physiological processes such as appetite control, anxiety, and stress response.