Principles of Economics, 7th Edition

Published by South-Western College
ISBN 10: 128516587X
ISBN 13: 978-1-28516-587-5

Chapter 36 - Part XIII - Six Debates over Macroeconomic Policy - Questions for Review - Page 815: 6

Answer

One way a government deficit hurts a future worker is that, when the government debts come due, the workers must decide to either have higher taxes and and less government spending (to make other resources available to pay off the debt) or push the government into even more debt (and roll over the debt).

Work Step by Step

Another way a government deficit hurts a future worker is that a deficit means that public saving is negative. This would also decrease private saving. The decreased saving increases the real interest rate and cuts the level of investment in the economy. In turn, the decreased investment level will lead to smaller levels of capital. The lower capital levels lead to lower labor production levels, lower real wages, and lower levels of GDP.
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