Many Economists Argue That the Long-Term Burden of Government Debt

question 23

Multiple Choice

Many economists argue that the long-term burden of government debt will include:
1) a redistribution of resources away from future generations toward the current generation;
2) reduced investment and as a result a lower long-run rate of economic growth;
3) a burden on future generations who will have to pay interest to the owners of government bonds.

• A)1 and 2
• B)2 and 3
• C)1,2,and 3
• D)2 only
• E)3 only

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Definitions:

Interest Rate

The percentage charged on a loan or paid on savings over a certain period of time, essentially the cost of borrowing money or the reward for saving.

Optimal Choice

The most efficient, advantageous selection or decision based on available information and constraints.

Substitution Effect

The change in consumption patterns due to a change in relative prices, leading consumers to substitute the consumption of one good for another.

Interest Rate

The remuneration, depicted as a fraction of the principal, that a lender exacts from a borrower for asset utilization.