How serious is the national debt to our economic ...

[tatyanajohnson]

How serious is the national debt to our economic stability?

Question 2

Assume that banks lend out all their excess reserves. Currently, the legal reserves that banks must hold equal 11.5 billion. If the Federal Reserve decreases its reserve requirement from 10 percent to 5 percent, then there is potential for the whole banking system to raise the money supply by:
 a. 11.5 billion.
  b. 230 billion.
  c. 115 billion.
  d. 57.5 billion.
  e. 575 billion.

[todom5090]

Answer to Question 1

The debt is a significant issue but not as troubling as some in the media make it out to be. The debt is owed to the citizens of the United States and it is the obligation of the government to them. Contrary to public hype, typically foreigners own 30 percent. The real problem with government engaged in deficit spending, which builds debt, is the upward pressure on interest rates and the crowding out of consumer and business borrowing.

Answer to Question 2

c

[tatyanajohnson]

TYSM

[epscape]

Excellent