Increases in the fraction of national debt held by foreigners _____ the burden of debt service on future generations _____.
a. decrease; because it is easier for the borrowing nation to default on the debt
b. decrease; but may make the country more vulnerable to foreign intervention
c. decrease; because debt servicing accomplished by increases in the money supply is not as inflationary as it would be if all debt were held domestically
d. increase; because taxes to repay the debt are collected within the country but more interest payments on the debt are sent outside
e. increase; because foreign bondholding pushes up interest rates at the date of issue, increasing crowding out
Question 2
If the expected inflation rate is 4 percent and the nominal interest rate is 9 percent, the expected real interest rate is _____.
a. 13 percent
b. 5 percent
c. 9 percent
d. 13 percent
e. 5 percent
Herzog & de Meuron, The Bird's Nest—Beijing National Stadium.
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