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econ101fall11lecture21 - Burdens of Debt Finance Debt...

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Burdens of Debt Finance Debt Finance : Government sells Bonds to (i.e., Borrows from) the Private Sector to Finance Deficits Potential Burdens Interest on the Debt is paid by Future Generations Crowding out of Private Investment
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Debt Paid by Future Generations (i.e., Our Children) Claim : Our Children will have to sacrifice their Consumption and Standard of Living to pay the interest on the Debt Claim hinges on whether Debt is held by US Citizens or Foreigners False if Debt is held by US Citizens True if Debt is held by Foreigners Approximately 47% of Government Debt is now held by Foreigners
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