It is important to distinguish between the privately held portion of the national debt and the portion held by government agencies and the Federal Reserve system because
A) the government will not have to repay the privately held debt.
B) only the privately held debt creates a net interest liability for the federal government.
C) the privately held debt does not create a net interest liability for the federal government.
D) taxes will have to be raised in order to pay the interest on the debt held by the Federal Reserve system.

Question

Quizplus · Accepted Answer

The portion of the national debt held by government agencies and the Federal Reserve system does not create a net interest liability for the federal government as those agencies are part of the government. Only the portion of the debt held by the private sector creates a net interest liability, as the government must pay interest to those private investors. Therefore, it is important to distinguish between the two portions of the debt when assessing the government's overall interest obligations.

It Is Important to Distinguish Between the Privately Held Portion