Do you think it is correct policy that the federal government is not required to finance all of its expenditures with tax revenues and is allowed to borrow? What are the implications of this policy?
What will be an ideal response?
Answers will vary, but financing out of current spending ensures that there are no deficits at
the end of the fiscal year. However, in times of crisis, such as war, this type of financing would limit the government's ability to accomplish its stated goals.
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The solvency of Social Security can be extended if
A. the tax rate is reduced. B. the retirement age is increased. C. the cap on taxable earnings is lowered. D. the trust fund invests in government bonds.
Peter Piper picks a peck of pickled peppers using 10 units of labor and two pepper-picking machines. The last worker hired picked 100 peppers, and the last machine added 1,000 peppers. If labor can be hired at $5 a pepper picker and machines cost $5,000, what advice do you have for Peter Piper?
What will be an ideal response?
Open Market Operations refer to the buying and selling of
A. corporate equities. B. government securities. C. commodities. D. gold.
Megan took a pay cut from $10 an hour to $7 an hour. As a result of the wage decrease, Megan desires to work less hours and take more hours of leisure. For Megan
A. the substitution effect must be zero. B. the income effect dominates the substitution effect. C. the substitution effect dominates the income effect. D. the substitution effect must equal the income effect.