Which of the following correctly describes a way in which deficit spending can impose a burden on future generations?
I.
Failure to allocate deficit spending to uses that boost future real Gross Domestic Product (GDP) will require taxing future generations at a higher rate to repay the resulting higher public debt.
II. Government deficits that lead to higher employment and real Gross Domestic Product (GDP) in the future will generate increased income taxes for future governments, which will respond by spending the higher tax revenues, creating higher future government budget deficits.
III. Other things being equal, deficit spending fuels increased consumption of goods and services by the current generation that crowds out capital investment, thereby leaving future generations with a smaller stock of capital than otherwise would have existed.
A) I only B) II only C) I and III only D) II and III only
C
You might also like to view...
A voucher can eliminate the deadweight loss and lead to an efficient outcome if the value of the voucher equals the ________ of the good
A) marginal external benefit B) marginal social benefit C) marginal private benefit D) marginal social cost
Economic profits and losses are true market signals because they
A) convey information in an asymmetrical fashion. B) convey information about rewards people should anticipate experiencing by shifting resources from one activity to another. C) convey information to public officials about where to encourage people to invest and what skills people should develop. D) cause people to move into careers in both undesirable and desirable industries with equal ease.