Reading 26: Fiscal Policy-LOS c 习题精选 2011, him, accounting, including, center

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Session 6: Economics: Monetary and Fiscal Economics
Reading 26: Fiscal Policy

LOS c: Discuss the generational effects of fiscal policy, including generational accounting and generational imbalance.

 

 

Thomas Moller is an economist for Econometrics Associates. Moller’s supervisor asks him to propose how to reduce the fiscal imbalance. Moller contends that the fiscal imbalance can be reduced by raising income taxes. Moller’s colleague, Melissa Stephens, contends that the fiscal imbalance can be reduced by cutting government promised benefits.

Regarding their statements, Moller and Stephens are:

Moller

Stephens

A) Incorrect Correct

B) Correct Correct

C) Correct Incorrect

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The fiscal imbalance, defined as the difference in present values between the government’s promised benefits and revenues, can be reduced by increasing taxes, cutting promised benefits, or cutting other government spending. Both Moller and Stephens are correct.

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Which of the following most accurately describes the generational effects of fiscal policy?

A) Fiscal imbalances must be corrected in the future by increasing taxes or decreasing government spending, and much of the burden will fall on future generations.

B) Fiscal stimulus generates economic activity greater than the amount of the stimulus due to the multiplier effect on future generations.

C) Each generation of fiscal policy decisions has unintended effects that require another generation of fiscal policy actions to correct them.

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Generational effects of fiscal policy refer to the burden of government deficits, which must be corrected by future increases in taxes or decreases in government spending. Studies show that in the U.S., more than half of the burden of the fiscal imbalance will fall on future generations.

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In the context of fiscal policy, a generational imbalance exists when:

A) the projected number of taxpayers in a future generation is less than the current number of taxpayers.

B) the present value of government benefits owed to the current generation is greater than the taxes the current generation will pay.

C) government benefits promised to future generations are greater than benefits promised to the current generation.

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A generational imbalance is said to exist when the present value of government obligations owed to the current generation is greater than the lifetime tax burden of the current generation—i.e., if benefits have been promised to the current generation that will have to be paid from taxes levied on future generations.

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