UPSC PRELIMS · ECONOMICS · INDIAN ECONOMY: PUBLIC FINANCE
Consider the following statements regarding the public debt of the United States: 1. In the event of a default, debt holders cannot exercise claims over the assets of the US Government. 2. US Government debt is not backed by specific hard assets and is based on the faith and credit of the government. Which one of the following is correct?
Take a breath. Choose one. Press A–D on your keyboard if you like.
EXPLANATION
US Treasury debt is a sovereign obligation rather than a claim secured by particular government assets. It rests on the government's full faith and credit, so both statements are correct and the second explains the first.
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