Economics · Public Finance
Which of the following is NOT true according to the classical views on public debt?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1Public debt destroys capital which otherwise could be used productively by private individuals.
- 2Public debt creates barren production and consumption, and the burden is transferred to the future generation.
- 3Public debt financing supports compensatory budget policy as an effective tool for stimulating aggregate demand.✓
- 4Public debt financing requires funds for interest payment and amortization, hence imposing a double burden on taxpayers.
Correct answer
Public debt financing supports compensatory budget policy as an effective tool for stimulating aggregate demand.
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