When Government Debt Is Financed Internally, Future Generations Will

question 33

Multiple Choice

When government debt is financed internally, future generations will

• A) inherit a higher tax liability without additional interest income.
• B) inherit neither higher taxes nor additional interest income.
• C) inherit both higher taxes and additional interest income.
• D) receive lower interest income and a lower tax liability.

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Definitions:

Life Insurance Policy

A contract between an insurer and a policyholder where the insurer pays a designated beneficiary a sum of money upon the death of the insured person.

Lump Sum

A single payment made at a particular time, as opposed to a series of payments made over time.

Insurance Proceeds

The money received from an insurance claim, compensating for losses or damages covered by an insurance policy.

Annuity Due

A type of annuity payment where payments are made at the beginning of each period instead of the end.