In a Democratic Setting, Debt Financing Is Attractive to Elected

question 145

Multiple Choice

In a democratic setting, debt financing is attractive to elected political officials because

• A) it makes it possible for them to spend on current projects favored by their constituents without having to levy current taxes.
• B) it drives up interest rates, which encourages saving.
• C) it leads to higher taxes in the future, which will tend to slow economic growth.
• D) it makes the cost of government more visible, which will help voters allocate government spending more efficiently.

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Definitions:

Stockholders

Individuals or entities that own shares in a corporation, giving them certain rights such as voting on corporate matters.

Transaction Costs

Expenses incurred when buying or selling goods and services, such as fees and commissions.

Tailoring

Adjusting financial strategies or models to address specific needs or circumstances of a business or investment.

Income Stream

A series of regular payments or revenues generated over time from investments, work, or business activities.