Which Is an Important Problem Associated with the Public Debt

question 62

Multiple Choice

Which is an important problem associated with the public debt?

• A)Payments of interest on the debt lead to greater income equality.
• B)Interest payments on the debt tend to improve economic incentives to work and produce more unemployment.
• C)Government borrowing to finance the debt may increase the level of private investment.
• D)Payment of interest on the debt held by foreigners transfers real resources abroad

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Definitions:

Standard Deviation

Measures the amount of variability or dispersion around an average, reflecting the risk associated with a variable’s stability in financial contexts.

Risk-Free Rate

The theoretical rate of return of an investment with zero risk, typically associated with government bonds.

Capital Allocation Line

A line on a graph that represents the risk-reward ratio of investments, showing the optimal portfolio mix between risk-free assets and risky assets.