107.Why is foreign government ownership of U.S. debt not currently a huge concern among many economists?a.It could lead to eventual foreign control of our economy and policies, which would encourage economic growth in the future.b.The United States has a proven track record of negotiating debt-forgiveness deals, so it is unlikely that the debt will have to be paid back.c.Foreign ownership of U.S. debt drives interest rates up, which is good for savers in the United States.d.The amount of debt held by foreigners is substantially less than the money the United States owes itself.e.Foreign countries would bail out the United States if its debt ever becametoo large to manage.ANS: DDIF: EasyTOP: III.C.REF: Foreign Ownership of U.S. Federal DebtMSC: Understanding108. In recent years, the growth in foreign-owned debt has:109. Which country holds the most U.S. debt?34
SHORT-ANSWER QUESTIONS1.Why has “entitlement reform” become such a major national issue?
2.The number of workers per retiree is a common feature in discussions of how to improve the sustainability of the Social Security program. What was the approximate number of workers per retiree when Social Security was first instituted? What is that number today? Discuss the challenges this poses for the federal government budget.ANS:The number of workers per retiree was greater than 40 to 1 when Social Security was first instituted. Now, the number of workers per retiree is approximately 2.9 to 1. That number is predicted to decline further, to 2.1 to 1, over the next 40 years. This is problematic for the federal governmentbudget because as the number of retirees grows and the generosity of the benefits in the program increases, there will be less tax revenue available per retiree. This could eventually mean that the Social Security program will face insolvency. One way to potentially slow this trend of the declining worker-to-retiree ratio is to increase the retirement age, which would keep
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