Question
Which of the following, regarding the possible consequences of a U.S. fiscal crisis, is false ? a. If the government tried to finance large deficits
Which of the following, regarding the possible consequences of a U.S. fiscal crisis, is false?
a. If the government tried to finance large deficits by printing money, hyperinflation could occur, as it did in Weimar Germany and modern Venezuela.
b. If U.S. federal debt had to be written down, the main investors losing assets would be large private banks and foreign governments.
c. 'Debt overhang' describes a situation in which a government is unable to make high-return investments due to cashflow or credit-access constraints resulting from its high existing debt.
d. If the government tried to solve a fiscal crisis through large tax increases, capital flight and brain drain could occur, as money and talent moved offshore.
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