Chap018 - Chapter 18 Deficit Finance Chapter 18 Deficit...

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Chapter 18 – Deficit Finance Chapter 18 – Deficit Finance 1. a. The government borrowing to finance a Memorial Day parade increases the national debt. In designing an accounting system for the government, the borrowing in this case should, in fact, increase the national debt. b. The sale of the Statue of Liberty to private entrepreneurs would decrease the national debt under current measurement. In the discussion on capital spending, on pages 458-9, the exercise here is similar to the sale of nondefense federal buildings in 2002. In designing an accounting system, this transaction is simply an exchange of assets and should have no effect on the debt, rather than decreasing the debt. The current system ignores tangible assets. c. The law promising free (future) medical care to children under five affects future spending, not current spending. As such, it does not affect the current measurement of the debt. This is similar to the discussion of the implicit legislative promises about Social Security on page 460. In designing an
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Chap018 - Chapter 18 Deficit Finance Chapter 18 Deficit...

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