"In the 1980s the pain which results from a large government deficit was deferred, placed on future taxpayers since foreigners loaned money to the government to pay the debt." Gordon suggests that this "pain" maybe deferred forever if
A) the government uses the "deficit funds" to provide taxpayers increased future benefits from which to pay the interest to foreigners.
B) monetary policy is tighter in the future.
C) fiscal policy is tighter in the future.
D) B and C are correct.
A
You might also like to view...
When a moral hazard problem exists for automobile driving, the marginal cost of driving
A) is lowered, and the amount of driving done is raised above the efficient level. B) is lowered, and the amount of driving done is lowered below the efficient level. C) is raised, and the amount of driving done is raised above the efficient level. D) is raised, and the amount of driving done is lowered below the efficient level. E) is raised above the efficient level, but market forces keep the total amount of driving is kept at the efficient level.
A risk-averse manager is hired to run a firm for shareholders. If shareholders cannot observe the manager's effort, which would be the best employment contract?
a. a high-powered incentive contract to elicit maximum effort. b. a fixed salary. c. a moderately powered incentive scheme that elicits some effort without exposing the manager to too much risk. d. an incentive scheme that provides maximum incentives and maximum insurance.
"Mediocre economists often consider only the immediate direct effects of a change, whereas a good economist will also consider indirect effects that may only become observable over time." This statement most clearly emphasizes
A) the law of comparative advantage. B) economizing behavior. C) the importance of secondary effects. D) the gains derived from voluntary exchange.
If the Federal Reserve buys $3 billion worth of Japanese yen and sells $5 billion of euros, how does this affect the official settlements balance?
A) Falls by $2 billion B) Rises by $2 billion C) Rises by $3 billion D) Falls by $5 billion