Question

20-The difference between the gross public debt and the net public debt is

A.the sum of all previously accumulated government budget deficits and surpluses.

B.all​ private-sector borrowing from private sources.

C.borrowing of government agencies from other government agencies within the nation.

D.the sum of all previously issued U.S. government securities that have been purchased by foreign residents.

4-Which of the following statements is true about the public debt and future​ generations?

A.Future generations may be better off if the rate of return on the borrowed funds is higher than the interest rate paid to foreign residents.

B.The public debt cannot be held by foreign residents therefore we really owe the debt to ourselves.

C.Increased consumption today will lead to increases in the capital stock in the future.

D.Future generations will always be worse off because they will have to pay off the public debt.

Answer 1

20.A.The difference between the gross public debt and the net public debt is A.the sum of all previously accumulated government budget deficits and surpluses

In other words,Gross Public Debt - Value of Assets owned by the Govt. = Net Public Debt

4.A.Future generations may be better off if the rate of return on the borrowed funds is higher than the interest rate paid to foreign residents. In other words,if the rate of return our govt. is generating on the borrowed funds from the creditors is more than the interest rate we are paying to the creditors ,it is good for the Govt.

Example (Hypothetical):India taking a $2 Billion loan from the United States at a subsidized interest rate of 1% for supplementing it's seed capital for Infrastructure Fund. Since this National Infrastructure Fund will definitely be generating a return of more than 1% (approx.8%) it will be very beneficial for India.