As market interest rates rise, the cost of the public debt

Question

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When market interest rates rise, the cost of the public debt also rises, because the government must pay higher interest rates to keep attracting investors to buy its bonds. This means that the government will have to allocate more of its budget to make interest payments, which could lead to higher taxes, reduced spending on other programs, or increased borrowing to cover the additional costs. Choice A is incorrect, as interest rates on some types of government debt may be fixed, but not all of it. Choice B is also incorrect, as safer financial assets may not necessarily offer higher returns than Treasury bonds, so investors may still demand higher interest rates to invest in government debt. Choice D is incorrect because Congress does not need to vote to increase interest payments, as these are usually set by market forces.

As Market Interest Rates Rise, the Cost of the Public