Why Are State and Local Governments Unable to Carry Large

question 5

Multiple Choice

Why are state and local governments unable to carry large levels of debt?

• A) They are constrained by their economic capacity to service their debt.
• B) They cannot levy income taxes.
• C) They all have upper limit restrictions on the rate at which they can tax.
• D) Federal legislation prohibits it, because federal funds will ultimately have to finance a state or municipal bail out.

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Definitions:

Interest Rates

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Random Walk Theory

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Inefficient Market Theory

The theory that asserts markets are not always perfectly efficient, meaning not all available information is always fully reflected in asset prices.

Technical Analysis

A trading approach that evaluates investments and identifies trading opportunities by analyzing statistical trends gathered from trading activity, such as price movement and volume.