12. As the outstanding debt of a nation becomes very large relative to the size of the economy, Group of answer choices -the borrowing cost of the government will decline. -lenders will have no choice but to hold the outstanding bonds and to buy the new ones as they are offered. -a country like the United States will have no choice but to default on the payments to bond holders. -if the country has a central bank, it will almost certainly resort to money creation to service the debt rather than directly default. Which is correct?
12. As the outstanding debt of a nation becomes very large relative to the size of the economy, Group of answer choices -the borrowing cost of the government will decline. -lenders will have no choice but to hold the outstanding bonds and to buy the new ones as they are offered. -a country like the United States will have no choice but to default on the payments to bond holders. -if the country has a central bank, it will almost certainly resort to money creation to service the debt rather than directly default. Which is correct?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Question
12.
As the outstanding debt of a nation becomes very large relative to the size of the economy,
Group of answer choices
-the borrowing cost of the government will decline.
-lenders will have no choice but to hold the outstanding bonds and to buy the new ones as they are offered.
-a country like the United States will have no choice but to default on the payments to bond holders.
-if the country has a central bank, it will almost certainly resort to money creation to service the debt rather than directly default.
Which is correct?
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