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UPSC Prelims 2024 Paper-I 📅 16 Jun, 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?

A
Both Statement-I and Statement-II are correct and Statement-II explains Statement-I
B
Both Statement-I and Statement-II are correct, but Statement-II does not explain Statement-I
C
Statement-I is correct, but Statement-II is incorrect
D
Statement-I is incorrect, but Statement-II is correct
Result Summary
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UPSC Prelims
2024 • 16 Jun, 2024 • Paper-I
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?
Correct Answer
Both Statement-I and Statement-II are correct and Statement-II explains Statement-I
Economy: Global Finance.Context: US Treasury Bonds.Details: Both statements are correct. US Treasury bonds are fiat instruments backed by the full faith and cre......
Ref/Book : UPSC Prelims 2024
Ref. Subject Economy
Chapter -
Ref. Topic Global Finance
Pg. No -
💡 Analysis & Explanation
Economy ▼
Global Finance.
Context ▼
US Treasury Bonds.
Details ▼
Both statements are correct. US Treasury bonds are fiat instruments backed by the full faith and credit of the US Government, not by physical hard assets like gold Statement II. If the US defaults, bondholders cannot simply seize physical assets to recover their money Statement I. Therefore, Statement II logically explains Statement I.
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