Other things equal, the stock of capital inherited by future generations is likely to be smaller when government spending
A) increases during a period of recession, rather than prosperity.
B) is primarily for capital-type goods.
C) is ﬁnanced by borrowing.
D) is ﬁnanced by taxation.

Question

Quizplus · Accepted Answer

When government spending is financed by borrowing, it can lead to higher interest rates and crowd out private investment. This reduction in private investment can lead to a smaller stock of capital being inherited by future generations, as less investment in capital goods occurs.

Other Things Equal, the Stock of Capital Inherited by Future