Sources of Public Debt: Internal and External

Description: Sources of Public Debt: Internal and External
Number of Questions: 15
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Tags: public debt internal debt external debt government borrowing
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Which of the following is an example of internal public debt?

  1. Treasury Bills

  2. Foreign Currency Bonds

  3. Eurobonds

  4. Samurai Bonds


Correct Option: A
Explanation:

Treasury Bills are short-term debt instruments issued by the government to meet its short-term cash requirements.

What is the primary source of external public debt?

  1. Borrowing from the World Bank

  2. Borrowing from the International Monetary Fund

  3. Issuing Sovereign Bonds in Foreign Markets

  4. All of the above


Correct Option: D
Explanation:

External public debt can be sourced from various sources, including borrowing from international financial institutions, issuing sovereign bonds in foreign markets, and receiving loans from foreign governments.

Which of the following is not a type of internal public debt?

  1. Treasury Bills

  2. Government Bonds

  3. Small Savings Schemes

  4. Foreign Currency Bonds


Correct Option: D
Explanation:

Foreign Currency Bonds are a type of external public debt, as they are issued in foreign currency and sold to foreign investors.

What is the main purpose of issuing sovereign bonds?

  1. To raise funds for government spending

  2. To manage the government's debt portfolio

  3. To stabilize the economy

  4. All of the above


Correct Option: D
Explanation:

Sovereign bonds are issued by governments to achieve various objectives, including raising funds for government spending, managing the government's debt portfolio, and stabilizing the economy.

Which of the following is an example of external public debt?

  1. Treasury Bills

  2. Government Bonds

  3. Eurobonds

  4. Small Savings Schemes


Correct Option: C
Explanation:

Eurobonds are a type of external public debt, as they are issued in a currency other than the domestic currency and sold to international investors.

What is the difference between internal and external public debt?

  1. Internal debt is owed to domestic lenders, while external debt is owed to foreign lenders.

  2. Internal debt is typically short-term, while external debt is typically long-term.

  3. Internal debt is usually less expensive than external debt.

  4. All of the above


Correct Option: D
Explanation:

Internal and external public debt differ in terms of the lender, the maturity period, and the cost of borrowing.

Which of the following is not a source of internal public debt?

  1. Borrowing from the central bank

  2. Borrowing from commercial banks

  3. Issuing government bonds

  4. Borrowing from foreign governments


Correct Option: D
Explanation:

Borrowing from foreign governments is a source of external public debt, not internal public debt.

What is the main advantage of issuing sovereign bonds in foreign markets?

  1. It allows the government to raise funds in a foreign currency.

  2. It helps to diversify the government's debt portfolio.

  3. It can help to stabilize the economy.

  4. All of the above


Correct Option: D
Explanation:

Issuing sovereign bonds in foreign markets offers several advantages, including the ability to raise funds in a foreign currency, diversify the government's debt portfolio, and stabilize the economy.

Which of the following is not a type of external public debt?

  1. Eurobonds

  2. Samurai Bonds

  3. Yankee Bonds

  4. Treasury Bills


Correct Option: D
Explanation:

Treasury Bills are a type of internal public debt, not external public debt.

What is the main disadvantage of issuing sovereign bonds in foreign markets?

  1. It can increase the government's exposure to foreign exchange risk.

  2. It can make it more difficult for the government to manage its debt portfolio.

  3. It can lead to higher interest rates.

  4. All of the above


Correct Option: D
Explanation:

Issuing sovereign bonds in foreign markets can have several disadvantages, including increased exposure to foreign exchange risk, difficulty in managing the debt portfolio, and higher interest rates.

Which of the following is an example of a domestic public debt instrument?

  1. Treasury Bills

  2. Government Bonds

  3. Eurobonds

  4. Samurai Bonds


Correct Option: A
Explanation:

Treasury Bills are short-term debt instruments issued by the government to meet its short-term cash requirements.

What is the primary source of internal public debt in India?

  1. Borrowing from the Reserve Bank of India

  2. Borrowing from commercial banks

  3. Issuing government bonds

  4. All of the above


Correct Option: D
Explanation:

In India, the government can borrow from the Reserve Bank of India, commercial banks, and issue government bonds to meet its internal public debt requirements.

Which of the following is not a type of external public debt instrument?

  1. Eurobonds

  2. Samurai Bonds

  3. Yankee Bonds

  4. Small Savings Schemes


Correct Option: D
Explanation:

Small Savings Schemes are a type of domestic public debt instrument, not external public debt instrument.

What is the main advantage of issuing sovereign bonds in domestic markets?

  1. It allows the government to raise funds in its own currency.

  2. It helps to diversify the government's debt portfolio.

  3. It can help to stabilize the economy.

  4. All of the above


Correct Option: D
Explanation:

Issuing sovereign bonds in domestic markets offers several advantages, including the ability to raise funds in the government's own currency, diversify the government's debt portfolio, and stabilize the economy.

Which of the following is not a type of internal public debt instrument?

  1. Treasury Bills

  2. Government Bonds

  3. Eurobonds

  4. Small Savings Schemes


Correct Option: C
Explanation:

Eurobonds are a type of external public debt instrument, not internal public debt instrument.

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