Predict the consequences of investors doubting the federal government's ability to repay the national debt.(1 point) Responses Investors would purchase new securities and try to sell their existing securities back to the government, resulting in a cash crunch. Investors would purchase new securities and try to sell their existing securities back to the government, resulting in a cash crunch. Fewer investors would be purchasing the securities from the Treasury, resulting in an increase in interest rates, and a further increase in the cost of borrowing for the national debt. Fewer investors would be purchasing the securities from the Treasury, resulting in an increase in interest rates, and a further increase in the cost of borrowing for the national debt. More investors would be purchasing the securities, resulting in a decrease in interest rates, which actually decreases the cost of borrowing for the national debt. More investors would be purchasing the securities, resulting in a decrease in interest rates, which actually decreases the cost of borrowing for the national debt. Investors would be selling their existing securities and buy new securities at lower interest rates, which lead to a decrease in available cash for the federal government.

Question

Predict the consequences of investors doubting the federal government's ability to repay the national debt.(1 point) Responses Investors would purchase new securities and try to sell their existing securities back to the government, resulting in a cash crunch. Investors would purchase new securities and try to sell their existing securities back to the government, resulting in a cash crunch. Fewer investors would be purchasing the securities from the Treasury, resulting in an increase in interest rates, and a further increase in the cost of borrowing for the national debt. Fewer investors would be purchasing the securities from the Treasury, resulting in an increase in interest rates, and a further increase in the cost of borrowing for the national debt. More investors would be purchasing the securities, resulting in a decrease in interest rates, which actually decreases the cost of borrowing for the national debt. More investors would be purchasing the securities, resulting in a decrease in interest rates, which actually decreases the cost of borrowing for the national debt. Investors would be selling their existing securities and buy new securities at lower interest rates, which lead to a decrease in available cash for the federal government.

Answer 1

Investors may also start to demand higher interest rates to compensate for the perceived risk of lending to the government, which would further increase the cost of borrowing. This could potentially lead to a debt crisis, as the government struggles to repay its debts at higher interest rates.

Additionally, if investors lose confidence in the government's ability to repay its debts, they may start to shift their investments to other countries with more stable economies. This could lead to a decrease in foreign investment in the US, resulting in a weaker economy overall.

Overall, if investors doubt the federal government's ability to repay the national debt, it could have serious consequences for the economy, including increased borrowing costs, decreased investor confidence, and potentially even a debt crisis.