Jennifer Earns an Above Average Income and Holds Part of Her

question 57

Multiple Choice

Jennifer earns an above average income and holds part of her wealth in the form of government bonds. Curtis earns an average income and holds no government bonds. Government increases taxes in order to pay the debt. What is the most likely results?

• A) Investment will increase.
• B) Income will be redistributed from Jennifer to Curtis.
• C) Income will be redistributed from Curtis to Jennifer.
• D) The productive capabilities of the economy will increase.

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Definitions:

Compensating Balance

A minimum bank account balance that a borrower is required to maintain with a lender as part of a loan agreement, often used to offset the cost of maintaining the loan.

Deficit Financing

The practice of funding government spending by borrowing rather than from taxation, leading to budget deficits.

Interest Charges

The cost incurred by an entity for borrowing funds; these are often calculated as a percentage of the principal amount loaned or the outstanding balance.

Compensating Balance

A minimum bank account balance that a borrower must maintain as part of a loan agreement, often used to offset the cost of the loan.