Guys, please help for the following True/False/Uncertain statement:
If the government is required to balance its budget, then it cannot set fiscal spending (G) independently from tax rates.
Cheers!
2007-02-24 03:41:07 · 2 answers · asked by luzsdavis 1 in Social Science ➔ Economics
Presuming you are speaking of the Federal Government, then strictly speaking the answer is false because the government could resort to seignorage and use its printing authority as a substitute for a tax. Inflation would then be the hidden tax that is the substitute for the explicit tax rates. If inflation were considered a tax however, then the answer is true.
2007-02-24 05:04:34 · answer #1 · answered by OPM 7 · 0⤊ 0⤋
G can always be set indpendently of taxes and it always increases the economy.
So the answer would be "uncertain"
2007-02-24 20:01:19 · answer #2 · answered by Santa Barbara 7 · 0⤊ 0⤋