The concept of 'Intergenerational Equity' in fiscal policy emphasises:
A. Only reducing taxes for the current generation
B. Only maximising current consumption
C. Fair distribution of the burden of public debt between present and future generations
D. Only short-term stabilisation
Answer: Option C
Solution (By JKSSB Mock Tests)
Intergenerational equity requires that the burden of financing public expenditure and debt is distributed fairly across generations so that future generations are not unduly burdened.
Explanation:
Empirical evidence often shows that currencies with high interest rates tend to appreciate, contrary to the prediction of uncovered interest parity that they should depreciate; this is known as the forward-premium puzzle.
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