To Force Politicians to Judge Whether Government Spending Is Worth

question 19

Multiple Choice

To force politicians to judge whether government spending is worth the costs, some economists have argued for:

• A) a balanced-budget rule for fiscal policy.
• B) a constant money-growth rule for monetary policy.
• C) avoiding the assumption of any contingent liabilities.
• D) the application of Ricardian equivalence.

Understand the role of discounted cash flow techniques in evaluating the recovery of initial investment.

Identify how profitability indexes are used to evaluate investment projects and their relation to the internal rate of return.

Learn the importance of considering salvage values and cash inflows/outflows, including working capital changes, in project evaluations.

Understand the impact of differing discount rates and expected salvage values on the desirability of investment projects.

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Definitions:

Ethical

Pertaining to or dealing with morals or the principles of morality; concerned with the distinction between good and evil or right and wrong behavior.

Philanthropic

Pertaining to the act of contributing to the welfare of others, often through charitable donations or actions by individuals or organizations.

Beyond Compliance

Adopting ethical standards and practices that exceed the minimum legal requirements, often to achieve greater social responsibility or environmental stewardship.

Differential Value

The unique value that a product or service offers to its customers, distinguishing it from competitors' offerings.