Consider the following statements: Statement-I: If the United States of America (USA) were to default on its debt, holders of US Treasury Bonds will not be able to exercise their claims to receive payment. Statement-II: The USA Government debt is not back

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Submitted by examrobotsa on

Q: 42 (IAS/2024)
Consider the following statements:

Statement-I:
If the United States of America (USA) were to default on its debt, holders of US Treasury Bonds will not be able to exercise their claims to receive payment.

Statement-II:
The USA Government debt is not backed by any hard assets, but only by the faith of the Government.

Which one of the following is correct in respect of the above statements?

question_subject: 

Economics

question_exam: 

IAS

Statement-I is correct because if the US defaults, bondholders cannot claim payments. Statement-II is also correct, as US debt is backed by the government’s credit trust, not hard assets. However, Statement-II does not directly explain the potential inability to exercise claims detailed in Statement-I.