Any Deficit That a Government Might Run Must Be Financed

question 15

Multiple Choice

Any deficit that a government might run must be financed somehow. Which of the following is a vehicle by which a government might finance spending beyond its means?

• A) Floating new bonds
• B) Purchasing existing bonds
• C) Calling in foreign debt
• D) Turning over existing debt with advantageously lower interest rates
• E) Printing less new money

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Definitions:

Net Present Value

A calculation used to determine the value of an investment by discounting future cash flows to their present value to assess its profitability.

Working Capital

The variation between an organization's immediate assets and its immediate debts, reflecting its short-term fiscal stability and efficiency in operations.

Annual Net Operating Cash Inflows

The total cash that flows into a business from its operational activities over a year, minus cash outflows.

Incremental Cost Approach

A method of analyzing the financial information by only considering the expenses and revenues that will change as a result of a decision.