Increases in the Fraction of National Debt Held by Foreigners

Multiple Choice

Increases in the fraction of national debt held by foreigners _____ the burden of debt service on future generations _____.

A) decrease;because it is easier for the borrowing nation to default on the debt
B) decrease;but may make the country more vulnerable to foreign intervention
C) decrease;because debt servicing accomplished by increases in the money supply is not as inflationary as it would be if all debt were held domestically
D) increase;because taxes to repay the debt are collected within the country but more interest payments on the debt are sent outside
E) increase;because foreign bondholding pushes up interest rates at the date of issue,increasing crowding out