A public debt that is owed to foreigners can be burdensome because
A) foreign interest rates are persistently higher than domestic interest rates.
B) the payment of interest reduces the volume of goods and services available for domestic uses.
C) the payment of interest will conﬂict with a nation's foreign aid programs.
D) the payment of interest will necessarily have a deﬂationary effect on prices in the paying nation.

Question

Quizplus · Accepted Answer

When a country owes debt to foreigners, it must pay interest on that debt. This means that a portion of the country's income is going towards paying off the interest, which reduces the volume of goods and services available for domestic use. This can be a burden on the economy as it limits the amount of money that can be spent on domestic needs and investment.

A Public Debt That Is Owed to Foreigners Can Be