Over the Long Run, the Fundamental Funding Sources for the Government

question 193

Multiple Choice

Over the long run, the fundamental funding sources for the government are

• A) user charges, taxes, and borrowing.
• B) taxes, transfer payments, and borrowing.
• C) user charges and taxes.
• D) taxes and borrowing.

---

Definitions:

Money-demand Curve

A graphical representation that shows the relationship between the quantity of money people want to hold and the interest rate, under ceteris paribus conditions.

Government Cuts Taxes

A policy action where the government reduces the rate or amount of taxes levied on individuals or businesses, aiming to stimulate economic activity.

People's Incomes

The total earnings received by individuals from all sources, including wages, salaries, benefits, and investment income.

Crowding-out Effect

A situation where increased government spending leads to a reduction in private sector spending and investment, often due to higher interest rates.