The diagram below shows the budget deficit function for a hypothetical economy.
FIGURE 32- 1
-It can be argued that a government budget deficit, rather than being a burden for future generations, may provide net benefits to future generations. This view is correct if the current budget deficit is used to

Question

The diagram below shows the budget deficit function for a hypothetical economy.
  FIGURE 32- 1
-It can be argued that a government budget deficit, rather than being a burden for future generations, may provide net benefits to future generations. This view is correct if the current budget deficit is used to

Quizplus · Accepted Answer

Financing projects that deliver long-term benefits to society, such as infrastructure development or research and development, can have positive spillover effects on future generations. These investments may result in increased economic growth, improved living standards, and increased productivity, which can benefit future generations. However, paying subsidies, making transfers, or purchasing goods not available in the local economy may not have the same long-term benefits and may not be sustainable solutions for a budget deficit. Ensuring that all interest paid goes to residents rather than foreigners may have some benefits, but it may not be enough to offset the negative effects of a budget deficit.

The Diagram Below Shows the Budget Deficit Function for a Hypothetical