In a Democratic Setting, Debt Financing Is Attractive to Elected

question 145

Multiple Choice

In a democratic setting, debt financing is attractive to elected political officials because

• A) it makes it possible for them to spend on current projects favored by their constituents without having to levy current taxes.
• B) it drives up interest rates, which encourages saving.
• C) it leads to higher taxes in the future, which will tend to slow economic growth.
• D) it makes the cost of government more visible, which will help voters allocate government spending more efficiently.

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Definitions:

Average Collection Period

The average number of days it takes for a company to receive payment from its customers for invoices issued.

Inventory Turnover

A measure of how often a company sells and replaces its stock of goods within a certain period.

Average Sale Period

The average amount of time it takes for a company to convert its inventory into sales.

Operating Cycle

The duration of time it takes for a company to purchase inventory, sell the goods, and receive cash from sales.