Question #58

BHP builds its business by borrowing and investing in assets which allow it to earn an economic rate of return. Most commentators applaud this level of entrepreneurship. The analogy

• also applies to the national government as long as it is earning a positive return on the projects it borrows against.
• does not apply to the national government because its investment decisions are not disciplined by the private market which forces funds to be efficiently deployed.
• does not apply to the national government because unlike BHP, its spending is not constrained by available revenue.

Answer #592

Answer: does not apply to the national government because unlike BHP, its spending is not constrained by available revenue.

Explanation

Please see Debts and deficits again! for more information. If you are unsure ask a question via the comments.