Question

Which of the following is not a problem with excessive debt?

a. it reduces the quantity of resources available to invest in economic development.
b. if debt service is substantial, schools, health clinics, roads, ports, other infrastructure, and social needs are less likely to be addressed.
c. it can reduce the chance of a crisis.
d. it worsens the central government's budget position by adding large debt service payments to other budget items.

Answer 1

Excessive debt can have several negative consequences, but it can also reduce the chance of a crisis.

Step-by-step explanation:

The correct answer is c. It can reduce the chance of a crisis.

Excessive debt can have several negative consequences, including reducing the quantity of resources available for economic development, making it less likely for schools, health clinics, infrastructure, and social needs to be addressed, and worsening the central government's budget position. However, one potential advantage of excessive debt is that it can reduce the chance of a crisis. This is because when a government has a large amount of debt, it may be more cautious with its spending and take measures to ensure it can continue to make debt service payments.