Critics of the Keynesian View Argue That Increases in Government

question 121

Multiple Choice

Critics of the Keynesian view argue that increases in government spending financed by borrowing will hamper the recovery from a recession and  slow long term growth because

• A) more spending and debt will lead to higher future taxes to cover the cost of government and the interest on the debt.
• B) government spending is directed by political forces, rather than efficient cost-revenue comparisons.
• C) more political spending will lead to more wasteful rent-seeking activities  and less production of goods and services that people value.
• D) All of the above are true.

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Definitions:

Years

Units of time that represent a period of approximately 365 or 366 days, based on the Earth's orbit of the sun.

Annuity

A financial product that pays out a fixed stream of payments to an individual, typically used as part of retirement planning.

Discount Rate

The interest rate by which future cash flows are devalued to their present worth in a DCF analysis.

Cash Flows

represent the net amount of cash and cash-equivalents being transferred into and out of a business.