Using taxes to finance a war, rather than deficits:
A) shares less of the burden of the war with future generations.
B) leads to relatively large decreases in investment.
C) leads to a larger future capital stock.
D) Both A and B.
E) Both A and C.

Question

Quizplus · Accepted Answer

Using taxes to finance a war rather than deficits shares less of the burden of the war with future generations and leads to a larger future capital stock. This is because when taxes are used, the cost of the war is spread out amongst the current generation, rather than future generations being burdened with the cost through interest payments on borrowed money. Additionally, using taxes to finance a war can encourage savings and investment, which can lead to a larger future capital stock.

Using Taxes to Finance a War, Rather Than Deficits