Unfunded liabilities occur when the government considers long-term benefits and costs of projects, and approves only those with positive long-term net benefits.

Question

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Unfunded liabilities refer to government commitments to pay for future obligations such as pension benefits or healthcare costs, without setting aside enough money to cover those expenses. It does not necessarily mean that the government carefully considers the long-term benefits and costs of projects before approving them.

Unfunded Liabilities Occur When the Government Considers Long-Term Benefits and Costs