The direct cost of public debt depends on:
A) the interest rate.
B) enacted fiscal policy.
C) the implementation lag.
D) who has purchased Treasury securities.

Question

Quizplus · Accepted Answer

The direct cost of public debt depends on the interest rate, as the government pays interest on the debt it has incurred. The higher the interest rate, the higher the direct cost of public debt. Enacted fiscal policy and implementation lag can affect the level of public debt, but they do not directly impact the cost of servicing the debt. The identity of the holders of Treasury securities may have some indirect impact on the cost of debt, but it is not a direct determinant.

The Direct Cost of Public Debt Depends On