Is it possible to impose a burden on future generations by increasing the public debt?
What will be an ideal response?
While the answer is generally no to this question, it is possible if the interest payment on the public debt is increasing faster than the GDP. This means that the tax burden on individuals must be growing faster than their earning power, and debt that was incurred earlier is being paid for by today’s citizens. Projecting the scenario into the future means imposing a burden on future generations unless the GDP keeps pace with the interest payments. Also, large deficits during peacetime, full-employment periods raise concerns about the ability of the economy and government to use expansionary policies if future recessions need government programs to help emerge from these recessions. Finally, if deficit-financed government spending drives up real interest rates and crowds out private investment, future generations are left with a reduced capital stock. Consequently, their productivity and earnings may be less than would otherwise be the case.
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The law of diminishing marginal returns implies that, in the short run the
a. output must fall beyond a certain point b. price must fall beyond a certain point c. marginal product of the variable input must eventually decrease d. wages of workers must eventually increase e. total cost must fall beyond a certain point
Normally, owners of firms should try to induce their managers to care:
A. solely about profits. B. about profits and output. C. solely about output. D. None of the statements associated with this question is correct.