Final answer:
Debt held by the public includes Treasury securities owned by various entities outside the federal government and has significant economic implications, especially when owed to foreigners.
Step-by-step explanation:
​Debt held by the public involves Treasury securities held by individuals, corporations, the Federal Reserve System, and foreign, state, and local governments.
This type of debt is distinct from the debt held by government trust funds. The latter represents intergovernmental debt, which is money that different parts of the government owe to each other, lacking the same impact as public debt.
On the other hand, public debt includes funds borrowed from U.S. citizens and foreigners to cover budget deficits, and it mandates repayment with interest in the future. Notably, foreigners are major buyers of U.S. federal debt, contributing to the investment trillions of dollars into the United States each year.
When the government repays its public debt, there is a redistribution of funds within the economy, often through tax collections. However, when debt is owed to foreigners, there's a loss of purchasing power since that money is transferred out of the U.S. economy.
Overall, public debt is a critical aspect of government finance and has implications for national economic policy and international relations.