Question

Which statement is true? (LO9, 11) a) About one-third of the national debt is rolled over (or refinanced) every year. b) The national debt is doubling every 10 years. c) Unless we balance the budget within the next five years, the United States stands a good chance of going bankrupt. d) None of these statements is true.

Short answer

The true statement is: \(a)\) About one-third of the national debt is rolled over (or refinanced) every year.

Step-by-step solution

Evaluating Statement a

According to various sources and economic data, a significant portion of the national debt is indeed rolled over (refinanced) every year. This occurs as governments issue new debt to pay off old debt that is coming due, keeping the debt level relatively stable. So, statement a is a possibility, but let's check the other statements before finalizing our answer.

Evaluating Statement b

For the national debt to double every 10 years, the debt would have to grow at a compound annual growth rate of about 7.2% (\(1.072^{10}\approx2\)). This rate of growth is quite high and may not be sustainable over a long period. However, the actual growth rate of national debt can vary across time depending on fiscal policies, economic conditions, and other factors. So, it is not accurate to generalize that the national debt is doubling every 10 years, making statement b false.

Evaluating Statement c

The concept of a country like the United States going bankrupt is not accurate, as there is no such legal framework for a sovereign nation. Furthermore, the U.S. has control over its currency (which is also a global reserve currency) and can technically create more money to pay off its debt if necessary, although that could lead to inflation and other economic issues. Balancing the budget within the next five years is also a political and economic choice, not a strict necessity to avoid bankruptcy. Therefore, statement c is not true.

Evaluating Statement d

Statement d claims that none of the statements is true. However, as we have seen, statement a describes a real aspect of national debt management, so statement d is also false.

Conclusion

Through our analysis, we have found that statement a is true: about one-third of the national debt is rolled over (or refinanced) every year. The other statements, b, c, and d, are not accurate descriptions of the national debt situation.