Public Choice Analysis Indicates That Elected Political Officials Will Find

question 119

Multiple Choice

Public choice analysis indicates that elected political officials will find debt financing

• A) unattractive because voters will recognize that excessive debt will lead to the future collapse of the economy.
• B) attractive because countries with a higher debt to GDP ratio generally grow more rapidly.
• C) unattractive because both politicians and voters will recognize that a larger outstanding debt will mean higher future taxes.
• D) attractive because current spending can provide voters with highly visible goods, services, and transfer payments, while borrowing will push the most visible cost of this spending into the future.

---

Definitions:

Maturity Hedging

A financial strategy used to manage the risk associated with the timing of cash flows, particularly the mismatch between asset maturities and liability maturities.

Short-Term Assets

Assets expected to be converted into cash or used up within one year or an operating cycle, whichever is longer.

Flexible Financing

A financing approach that offers various adaptable payment options to meet the differing financial needs and situations of borrowers.

Seasonal Funding

Temporary financing used to cover seasonal increases in business expenses or inventory needs.