Question #18

Even though a sovereign government doesn't have to "finance" its spending, if it issues debt to the private sector

• it will push up interest rates because there is only a finite amount of savings available at any time to buy the bonds.
• it will not push up interest rates because budget deficits put downward pressure on rates and bond sales just maintain them at their previous rate.
• it will push up interest rates if the government makes a decision that they should be higher either through direct central bank intervention or through voluntary debt issuing arrangements that allow this.

Answer #105

Answer: it will push up interest rates if the government makes a decision that they should be higher either through direct central bank intervention or through voluntary debt issuing arrangements that allow this.

Explanation

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