the government of kashyyyk has a $200 million national debt which accrues 10% interest annually. the…

the government of kashyyyk has a $200 million national debt which accrues 10% interest annually. the government would like to maintain a balanced budget and reduce the size of the national debt, but also does not want to change transfer payments. which of the following actions will achieve the government of kashyyyks goals? choose 1 answer: a borrow money from another government agency b issue government bonds c increase tax revenues by more than $20 million d increase tax revenues by $20 million e borrow money from foreign entities to make interest payments

the government of kashyyyk has a $200 million national debt which accrues 10% interest annually. the government would like to maintain a balanced budget and reduce the size of the national debt, but also does not want to change transfer payments. which of the following actions will achieve the government of kashyyyks goals? choose 1 answer: a borrow money from another government agency b issue government bonds c increase tax revenues by more than $20 million d increase tax revenues by $20 million e borrow money from foreign entities to make interest payments

Answer

Brief Explanations:

The annual interest on a $200 - million national debt at 10% is $200\times0.1 = 20$ million. To maintain a balanced budget and reduce the national - debt without changing transfer payments, the government needs to increase revenues by more than the amount of annual interest. This will allow it to pay the interest and also have some funds to reduce the principal of the debt. Borrowing from other government agencies, issuing bonds, or borrowing from foreign entities to make interest payments will not reduce the debt in the long - run. Only increasing tax revenues by more than $20$ million will achieve the goals.

Answer:

C. Increase tax revenues by more than $20$ million