Which of the following is a conclusion of using the generational accounting meas

Question

Which of the following is a conclusion of using the generational accounting measure?

a) Males born in 1998 are projected to pay less in taxes than they will receive in benefits from the government.           

b) Males born in 1998 are project to pay more in taxes than they will receive in benefits from the government.                  

c) Males over the age of 60 are projected to pay more in taxes than they will receive in benefits from the government over their lifetime.                  

d) Both a and c are correct.                    

e) Both b and c are correct.

Which of the following is true?                 

a) Both debt and deficit are flow variables.                              

b) Debt is a stock variable while deficit is a flow variable.                    

c) Debt is a flow variable while deficit is a stock variable.                    

d) Debt is measured in dollars while deficits are measured in jobs lost.                       

e) Both c and d are correct.

Explanation / Answer

Option B is correct

Generational accounting calculates the size of prospective net tax burdens and lifetime net tax rates that different generations face under current fiscal policy—information that standard budget presentations do not reveal. This method can also be used to calculate the policy changes required for achieving a generationally balanced and therefore sustainable fiscal policy—one that implies equal lifetime net tax rates on today’s newborns and future generations (those born after 1998).

Ques 2)

Option C is correct

c) Debt is a flow variable while deficit is a stock variable.   

Flow variables refer to those economic variables that are measured over a period of time or per unit of time. The timeline in this regard can be per quarter or per year. Examples of flow variables include income, budget deficits, investment expenditure, sales revenue and gross profit. Stock variables, on the other hand, mean those economic variables that are measured at a point in time. Hence debt, wealth, employment, money supply and capital stock (such as factories, inventory and infrastructure) are good examples of the stock variable.

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