During the 2007-2009 financial crisis, state and local governments now found their interest costs rising. Which of the following were causes of this?

Question

Quizplus · Accepted Answer

Lower tax revenues due to the weaker economy meant that these governments had less money to pay their debt, which in turn made investors believe that there was a higher chance of default. This meant that the value of monoline insurance guarantees on their debt, which are supposed to protect investors in case of default, was weakened. As a result, interest rates on their debt rose.

During the 2007-2009 Financial Crisis, State and Local Governments Now