Paying interest on external government debt rather than on domestic debt produces:
A)a net reduction in domestic income.
B)a redistribution of income within the country.
C)a net increase in domestic income.
D)no change in the level or distribution of domestic income.

Question

Quizplus · Accepted Answer

Paying interest on external government debt rather than on domestic debt results in a net reduction in domestic income because the interest payments are transferred out of the country, reducing the overall income within the domestic economy.

Paying Interest on External Government Debt Rather Than on Domestic