In a Two-Period Model with Default, the Nation Defaults on Its

Multiple Choice

In a two-period model with default, the nation defaults on its debt in the current period if

A) the market interest rate is high, the cost of defaulting is low, and national debt is high.
B) the market interest rate is low, the cost of defaulting is low, and national debt is high.
C) the market interest rate is high, the cost of defaulting is high, and national debt is low.
D) the market interest rate is low, the cost of defaulting is high, and national debt is low.
E) the government does not act in the interest of consumers.