ECONOMICS
PUBLIC DEBT
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Repayment of government loan
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Government bankruptcy
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Repudiation
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All of the above
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Detailed explanation-1: -Redemption of debt refers to the repayment of a public loan. Although public debt should be paid, debt redemption is desirable too. In order to save the government from bankruptcy and to raise the confidence of lenders, the government has to redeem its debts from time to time.
Detailed explanation-2: -Methods that are adopted for redemption of public debt are: 1. Refunding 2. Conversion 3. Surplus budgets 4.
Detailed explanation-3: -However, debt repudiation is not a method of solving debt redemption since it implies a rejection by the government to repay loans.
Detailed explanation-4: -Governments have no problem in paying back unless their notes printing press is on strike. How: To actually repay its debt, a government needs to develop a fiscal surplus. When: In the worst case, a government may resort to printing more notes to repay existing debt.
Detailed explanation-5: -Method # 1. Refunding: Method # 2. Use of Budgetary Surplus: Method # 3. Terminal Annuity: Method # 4. Sinking Fund: Method # 5. Debt Conversion: Method # 6. Statutory Reduction in the Rate of Interest: Method # 7. Additional Taxation: Method # 8. Capital Levy: More items