What is the 'debt overhang' hypothesis?

A theory suggesting that public debt has no impact on economic growth.

The idea that excessive public debt can impede investment and economic growth due to high debt servicing costs.

A theory proposing that public debt leads to higher investment and faster economic growth.

The notion that public debt has a positive impact on economic growth by encouraging government spending.

According to the 'debt overhang' hypothesis, how does excessive debt impact investment?

It stimulates investment by providing more funds.

It has no impact on investment.

It encourages investment in productive activities.

It retards investment due to high debt servicing costs.

What is the main argument of the school of thought that supports using public debt in productive activities?

Public debt has no impact on economic growth.

Public debt always leads to macroeconomic instability.

Public debt, when invested in productive activities, can promote economic expansion without causing instability.

Public debt can only be used for non-productive purposes.

What is the purpose of using panel data analysis in the present study?

To explore the relationship between electricity consumption and economic growth.

To study the impact of external debt on economic growth.

To assess the impact of domestic debt on economic growth in a specific context.

To analyze the impact of inflation on economic growth.

What is the primary advantage of using panel data analysis over pure cross-sectional or time-series analysis?

Panel data analysis is less time-consuming.

Panel data analysis allows for more accurate cross-country comparisons.

Panel data analysis accounts for both cross-sectional and time-series variations, providing more reliable results.

Panel data analysis is suitable only for advanced economies.

What is the relationship between financial development and economic growth, according to the endogenous growth models?

Financial development has no impact on economic growth.

Financial development leads to economic growth through increased investment and innovation.

Economic growth drives financial development, creating conditions for financial arrangements.

Financial development has an exaggerated role in generating growth.

What is the primary channel through which financial liberalization affects economic growth, as proposed by McKinnon (1973) and Shaw (1973)?

Financial liberalization reduces investment opportunities.

Financial liberalization increases government intervention in the economy.

Financial liberalization leads to higher saving rates and more efficient investment, resulting in economic growth.

Financial liberalization has no impact on economic growth.

What is the main concern of the 'causality' analysis mentioned in the text?

To establish a one-to-one correspondence between public debt and economic growth.

To determine the direction of causality between public debt and other economic variables.

To identify the correlation between domestic and external debt.

To compare the impact of different types of debt on economic growth.

Public Debt- 2 Free MCQ Practice Test with Solutions

	Public Finance 37 videos\|35 docs\|15 tests

	Public Finance 37 videos\|35 docs\|15 tests

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