TOLFA Segment 7, Question 3

A large minority of government spending is financed by borrowing (18% of the 2004 spend, as the pie chart shows.) Is this tax? Why, or why not? No. It's never-never financing, an accounting entry that nobody will ever pay off.
Yes. It shifts the burden from today's taxpayers to tomorrow's, but it's tax all right. Even the interest has to be paid.
Not really. When government goes out of business, those bond-holders will be left high and dry.

Don't hurry away; even when you've got the right answer, try clicking on the others to see why they are wrong! Then when you have correctly answered this make notes in your student notebook, then go to Question 4.

Segment 7 Page