Why are high bond yields a problem?
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1.Over time, if a nation borrows excessively, the interest rate on their loans will reach a critical level— that is, the interest rate on future loans is too high for the country to afford. If a country cannot borrow, it has only a few options to resolve it *
It has to be bailed out or Default is the answer for this practice question right ?
The question that lenders will naturally be able to supply that credit at a higher interest rate (which is the price of loanable funds), as the amount of borrowing increases (as the demand increases). The video tells what happens to a country's capacity to service its debt when the interest rate on its loans once the interest rate has increased.