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
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For products like parking lots and hotels, costs of building capacity are mostly fixed or sunk and firms in this industry typically face capacity constraints. Therefore,
a. If SRMR>SRMC at capacity, then the firms should price to fill capacity
b. If SRMR
Which set of changes is definitely predicted to raise Real GDP in the short run?
A) Wealth increases and there is an adverse supply shock. B) Individuals expect higher (future) incomes and wage rates fall. C) Business taxes rise and wage rates fall. D) The U.S. dollar appreciates and there is a beneficial supply shock. E) none of the above