For fiscal policy to be sustainable, the present value of all projected future revenues must equal the present value of projected future spending.

Question

Quizplus · Accepted Answer

Sustainable fiscal policy means that the government should be able to maintain its spending in the long run without creating large deficits or increasing its debt. This requires that the present value of all projected future revenues should be equal to the present value of projected future spending. If the government spends more than it can raise in revenue, it will have to borrow to finance its activities, leading to high levels of debt that can create problems in the future. Therefore, a sustainable fiscal policy requires that the government balances its budget over the long term by ensuring that its revenues and spending are in balance.

For Fiscal Policy to Be Sustainable, the Present Value of All