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:

Potential Drop

An anticipated decrease in value or performance, often used in the context of stocks or electrical voltage.

Earnings

The profit a company generates during a particular period, often used as a measure of its financial performance.

Effective Rate

The effective rate is the actual interest rate that a borrower pays on a loan or receives on a deposit account, after the compounding of interest is taken into account.

Contract Rate

The interest rate specified in a financial contract, notably in loans or leases, that must be paid over the duration of the agreement.