If a country implements a countercyclical fiscal policy, the budget deficit is likely to rise during a recession. If the government borrows money to pay its bills, ▼ current future taxpayers are implicitly responsible for paying back the government's debts.

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Abraham Valencia

Business

11 December, 22:04

If a country implements a countercyclical fiscal policy, the budget deficit is likely to rise during a recession. If the government borrows money to pay its bills, ▼ current future taxpayers are implicitly responsible for paying back the government's debts.

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Roger Berg · Answer 1

If the government borrows money to pay its bills, future taxpayers are implicitly responsible for paying back the government's debts.

Explanation:

Governments and households function in similar ways, if you want to purchase something and currently do not have the money, you will borrow it from a bank or use your credit card. Countries do not have credit cards but they issue securities.

In the same way that you pay your credit card bills in the future (using future income), a country will use future tax revenue (from future taxpayers) to pay for the securities that they issued.