In the context of economic history, what does it mean 'to assume states' debts'?

• A. Private banks purchase the debts owed by the states.
• B. States agree to pay off the federal government's national debt.
• C. States forgive all outstanding debts owed by their citizens.
• D. The federal government takes responsibility for paying off the debts incurred by individual states.

Answer: (D)

Verified step by step guidance

1. Understand the historical context: In early U.S. economic history, individual states had accumulated debts from activities like war financing.
2. Recognize the meaning of 'to assume states' debts': This phrase means that a higher authority, typically the federal government, agrees to take over the responsibility of paying off the debts that individual states owe.
3. Distinguish this from other options: It is not about private banks purchasing state debts, states paying off federal debt, or states forgiving citizens' debts.
4. Conceptually, assuming debts helps unify financial obligations and can strengthen the creditworthiness of the entire nation by consolidating debts under the federal government.
5. Therefore, 'to assume states' debts' means the federal government takes responsibility for paying off the debts incurred by individual states.