Question

Which statement best describes some of the components of externally held debt?

Mutual funds held by individuals, both foreign and domestic.

Public debt held by U.S. banks, firms, and individuals.

Public debt held by foreign individuals and entities.

Debt held by foreign and U.S. banks and firms, but not foreign or domestic individuals.

Answer 1

Externally held debt is best described as public debt held by foreign individuals and entities, reflecting foreign investment in a country's government bonds and securities, which differs from internal government obligations and can impact domestic purchasing power.

Step-by-step explanation:

The statement that best describes some of the components of externally held debt is: Public debt held by foreign individuals and entities. Externally held debt refers to the portion of a country's debt owed to creditors outside the country. This includes investments in government bonds, securities, and other financial assets. It is different from the internal debt, which involves governmental obligations to entities within the country itself. Furthermore, when the government repays its external debt, there can be a loss of purchasing power as the repayment often involves transferring resources out of the domestic economy. Foreign investors, including businesses and governments, are significant purchasers of U.S. federal debt, reflecting the interconnected nature of the global economy.

Answer 2

Public debt held by foreign individuals and entities.

Step-by-step explanation:

Public debt is defined as falling into one of two categories: internally held debt and externally held debt. Internally held debt is public debt held by U.S. banks, firms, and individuals. Externally held debt is public debt held by foreign individuals and entities. Note that this kind of debt is held only by the foreign nationals whether they are banks or financial institutions or even individuals.