The Government's Intertemporal Budget Constraint Assumes That the Budget Is

question 39

Multiple Choice

The government's intertemporal budget constraint assumes that the budget is:

• A) never balanced
• B) balanced in the first period
• C) balanced in the last period
• D) always balanced
• E) None of these answers are correct.

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Definitions:

Money-Demand Curve

A graphical representation illustrating the relationship between the quantity of money people want to hold and the interest rate.

Price Level

The price level is a measure of the average prices of goods and services in the economy at a given time.

Cost of Borrowing

The interest and any other charges incurred by borrowing money.

Open-Market Purchases

The buying of government bonds by a central bank to inject money into the economy and expand economic activity.