Is internally held public debt or externally held public debt less likely to be a problem? Explain
Internally held debt is less likely to be a problem, because the taxes paid by citizens to fund the interest
payments on the debt are offset by the receipt of those interest payments. Debt held by U.S. investors
means that future tax revenues to repay the debt are simply reshuffled within the economy. If the interest
payments on the debt go to foreigners, however, there is a redistribution of wealth from citizens to
foreigners, leaving the citizens less well off.
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When interest rates fall, a bank that perfectly hedges its portfolio of Treasury securities in the futures market
A) suffers a loss. B) experiences a gain. C) has no change in its income. D) may either gain, lose or see no change in its income.
Monetary policy in the United States is primarily the responsibility of ________
A) the President and Congress B) the Federal Reserve System C) the U.S. Treasury D) the Comptroller of the Currency