As the Size of a Nation's Outstanding Debt Gets Larger

question 98

Multiple Choice

As the size of a nation's outstanding debt gets larger and larger relative to the size of the economy,

• A) eventually it will become difficult for the country to borrow in global credit markets.
• B) the country will have to pay higher real interest rates in order to induce investors to purchase its bonds.
• C) at some point, the country will be more or less forced to bring spending into line with revenues in order to maintain the confidence of investors.
• D) all of the above are correct.

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