If the preferred bank stock acquired by the U.S. government through the TARP program is valued using a capital budgeting approach, then the government budget deficit in the year in which the stocks were acquired will be than if a current expenditure approach were employed.

Question

Quizplus · Accepted Answer

A capital budgeting approach values assets based on their expected future cash flows, whereas a current expenditure approach only looks at current expenses. Therefore, by using a capital budgeting approach, the government would be taking into account the future income streams from the preferred bank stock, possibly resulting in a smaller budget deficit compared to the current expenditure approach.

If the Preferred Bank Stock Acquired by the U