The USGovernment Need Never Default on Its Debt Because

question 83

Multiple Choice

The U.S.government need never default on its debt because

• A)it can easily nationalize banks, who own all the debt, and then owe it to itself.
• B)it can raise the funds it needs to repay by taxation, and it can print money to repay.
• C)it owes the debt to itself, and it can always ignore a demand for repayment.
• D)it can simply reduce spending enough to generate funds to repay its debt.

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Definitions:

Depreciation

The systematic reduction in the recorded cost of a fixed asset over its useful life.

Quick Ratio

A financial metric that measures a company's ability to meet its short-term obligations with its most liquid assets; also known as the acid-test ratio.

Current Assets

Assets that are expected to be converted into cash or used up within one year or one business cycle, whichever is longer.

Current Liabilities

Short-term financial obligations due within one year, such as accounts payable and short-term loans.