Which of the following is not an important problem associated with the public debt?
A) Payments of interest on the debt lead to greater income inequality.
B) Interest payments on the debt tend to reduce economic incentives to work and invest.
C) Government borrowing to ﬁnance the debt may lead to too much private investment.
D) Payment of interest on the debt held by foreigners sends real resources abroad.

Question

Quizplus · Accepted Answer

This statement is not a problem associated with public debt. In fact, it is often argued that government borrowing crowds out private investment, leading to a decrease in economic growth. Payments of interest on the debt (A and D) and the reduction of economic incentives to work and invest (B) are commonly cited problems associated with public debt.

Which of the Following Is Not an Important Problem Associated