In a two-period model, government spending is financed through
A) taxes and transfer payments.
B) taxes and issuing debt.
C) taxes and redeeming debt.
D) taxes only.
E) issuing bonds.

Question

Quizplus · Accepted Answer

In a two-period model, government spending is financed through taxes and issuing debt. The government can raise revenue through taxes in the current period and issue debt, which can be redeemed in the next period to finance government spending. This allows the government to smooth out its expenditures over time without having to rely solely on tax revenue in each period.

In a Two-Period Model, Government Spending Is Financed Through