What are four real and potential problems with the public debt?
What will be an ideal response?
Four real and potential problems with public debt are mentioned in the text: (a) Repayment of the debt affects income distribution in that working taxpayers will be paying interest to those who hold the debt. If those who hold the debt are primarily in the upper-income groups, income distribution may be made more unequal; (b) If the tax burden of paying the interest on the debt becomes excessive, it may damage incentives to work, save, and invest; (c) Debt owed to foreign investors could increase the nation’s burden since interest payments leave the country. It may also make our financing less stable if dependence on foreign lending increases; (d) Some public borrowing may “crowd out” private borrowing.
You might also like to view...
During an economic expansion, real GDP ________ and unemployment ________
A) increases; increases B) increases; decreases C) decreases; increases D) decreases; decreases
Which of the following is one explanation as to why the aggregate demand curve slopes downward?
A) Decreases in the price level raise the interest rate and increase consumption spending. B) Decreases in the price level raise the interest rate and increase investment spending. C) Decreases in the price level raise real wealth and increase consumption spending. D) Decreases in the U.S. price level relative to the price level in other countries lower net exports.
Refer to Figure 13-2. Ceteris paribus, a decrease in productivity would be represented by a movement from
A) SRAS1 to SRAS2. B) SRAS2 to SRAS1. C) point A to point B. D) point B to point A.
Perfect competition and monopolistic competition are similar in that firms in both types of market structure will.
A) act as price takers. B) produce a level of output where price equals marginal cost. C) earn zero profit in the long run. D) act as price setters.