An Increase in Government Spending Financed by Borrowing Changes People's

question 288

Multiple Choice

An increase in government spending financed by borrowing changes people's expectations about future taxation such that current consumption expenditures

• A)fall. The increase in expenditures makes it likely that future taxes will create smaller distortions.
• B)fall. The increase in expenditures makes it likely that future taxes will create larger distortions.
• C)rise. The increase in expenditures makes it likely that future taxes will create smaller distortions.
• D)rise. The increase in expenditures makes it likely that future taxes will create larger distortions.

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Definitions:

Standard Deviation

A metric that reflects the degree of spread or divergence in a group of values, revealing how far the values stray from the central value.

Portfolio

A portfolio consists of various financial assets such as stocks, bonds, commodities, cash, and equivalents like closed-end funds and ETFs (Exchange Traded Funds).

Expected Returns

The anticipated profit or loss from an investment, taking into account the probability of different outcomes.

Stocks' Returns

Stocks' returns refer to the gain or loss made on an investment in stock, usually expressed as a percentage of the investment's initial value.