Which of the following statements about the view that ‘debt does not matter because we owe it to ourselves’ is NOT correct?
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → It holds that debt owed to foreigners also involves no burden.
The view “we owe it to ourselves” is about debt owed within the nation. Debt owed to foreigners is a burden, because goods must be sent abroad to pay the interest.
Option (1) It holds that debt owed to foreigners also involves no burden. — False. Foreign debt involves a burden: goods go abroad to match the interest payments.
Option (2) It holds that purchasing power remains within the nation. — True. This is the reason given for the view.
Option (3) It is about debt that the government owes to the people of its own country. — True. “Ourselves” means the people of the country.
Option (4) It accepts that there is a transfer of resources between generations. — True. The view accepts this transfer but says it stays inside the nation.
NCERT (2026-27): “Perspectives on the Appropriate Amount of Government Debt: … It has often been argued that ‘debt does not matter because we owe it to ourselves’. This is because although there is a transfer of resources between generations, purchasing power remains within the nation. However, any debt that is owed to foreigners involves a burden since we have to send goods abroad corresponding to the interest payments.” |