The Economic Meaning of the Intertemporal Budget Constraint Is That

question 41

Multiple Choice

The economic meaning of the intertemporal budget constraint is that:

• A) the government's budget never has to balance.
• B) the government's budget must balance period by period.
• C) the present discounted value of the government's budget must balance.
• D) the government can always push its debt on future generations.
• E) every generation faces the same tax schedule.

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Definitions:

Marginal Revenue Product

The additional revenue generated by one more unit of input, such as labor or capital, in the production process.

Marginal Product

The increase in output that arises from an additional unit of input, holding all other inputs constant.

Profit-Maximizing Firm

A business entity's objective of adjusting production and sales to achieve the highest possible profit levels.

Wage Rate

The amount of money a worker is paid per unit of time, such as an hour or a month.