Consider the following statements:

1. 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.

2. 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

Consider the following statements:

1. 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.

2. 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?

Accepted Answer

Both Statement-I and Statement-II are correct and Statement-II explains Statement-I

Answer

Both Statement-I and Statement-II are correct, but Statement-II does not explain Statement-I

Answer

Statement-I is correct, but Statement-II is incorrect

Answer

Statement-I is incorrect, but Statement-II is correct

Explanation

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