The amount the government would owe if a borrower were to default on a government-guaranteed loan is an example of:
A) capital budgeting.
B) a contingent liability.
C) a cyclically adjusted liability.
D) Ricardian equivalence.

Question

Quizplus · Accepted Answer

A contingent liability is a potential liability that may or may not occur depending on the outcome of a certain event or circumstance. In this case, the borrower defaulting on a government-guaranteed loan would trigger the government's obligation to pay, making it a contingent liability.

The Amount the Government Would Owe If a Borrower Were