Which of the following federal government actions would make sense if a tax system fails to provide sufficient tax revenue?
A)Only issue treasury bonds.
B)Only cut funding to various federal projects.
C)Only increase federal spending.
D)Issue treasury bonds and cut funding to various federal projects but not increase federal spending.
E)None of the choices are correct.

Question

Quizplus · Accepted Answer

When a tax system fails to provide sufficient tax revenue, the government has a few options. One option is to issue treasury bonds to borrow money to make up for the shortfall. However, relying solely on borrowing is not sustainable in the long-term and can lead to increased debt. Another option is to cut funding to various federal projects to reduce spending. This could help balance the budget, but may have negative effects on important government programs. Lastly, the government could increase federal spending to stimulate the economy and potentially increase tax revenue in the future. However, this may not be feasible or desirable in all situations. Therefore, the best option would be to issue treasury bonds and cut funding to various federal projects, while avoiding an increase in federal spending. This allows for some flexibility to address the revenue shortfall while also keeping spending in check.

Which of the Following Federal Government Actions Would Make Sense