Question

Writing in the New York Times, Simon Johnson, an economie MIT, makes the woment that people side the United States may at some point decide to save less in which case they may hold onto their existing Unded States government debt but not want to buy so much of new issues) Source: Simon Johnson, "The Real Fiscal Risks in the United States," New York Times, December 6, 2012 Higher consumption and lower savings globally could negatively impact the US, because O A workers' rights are more likely to be violated in sweatshops when consumer spending is high OB. the Chinese would become more powerful if people spent more money on consumer goods • C the US government is a perpetual deficit spender which is partially on foreign savings to find the deficits OD. the US rekes on high global savings rates to build foreign infrastructure to fight the war on terom What is the impact of fewer buyers of U.S. debt? O A Lower deficits since there will be less interest to pay to forieges OB. A lower tendency towards money printing by the Federal Reserve to monetize the debt OC. Higher interest rates resulting in slower economic growth and lower employment D. Lower interest rates and higher employment

Answer 1

1. Option C i.e., the US government is a perpetual deficit spender which relies partially on the foreign savings to fund the deficits.

2. Option C i.e., higher interest rates resulting in lower economic growth and employment.