Which of the Following Statements Is TRUE About the Public

question 130

Multiple Choice

Which of the following statements is TRUE about the public debt and future generations?

• A) Future generations will always be worse off because they will have to pay off the public debt.
• B) Increased consumption today will lead to increases in the capital stock in the future.
• C) Future generations may be better off if the rate of return on the borrowed funds is higher than the interest rate paid to foreign residents.
• D) The public debt cannot be held by foreign residents therefore we really owe the debt to ourselves.

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Definitions:

Expected Return

The anticipated average return on an investment over a specific period based on historical data and market analysis.

Exclusion Ratio

In annuities, the proportion of payments considered as a return of the original investment and therefore not subject to income tax.

Life Annuity

A financial product that provides a guaranteed income for the remainder of the annuitant's life in exchange for an initial payment.

Annuity Payments

Periodic payments made to an individual, typically during retirement, derived from an annuity investment.