Among the following, who first proposed that internal government debt does not create a burden for the future generation?
Tap an option to check your answer.
1 mark, −0.333Public EconomicsPublic expenditure and public debtPublic debt: burden, classification and crowding outModerateabout 1 min
GATE 2023 Question 34: Public expenditure and public debt
Answer and worked solution
Answer: (D)
A. P. Lerner is credited as the economist who first articulated the view that internally-held government debt does not impose a net burden on future generations — his famous 'we owe it to ourselves' argument, since the interest and principal payments on domestically-held debt are transfers within the same generation/economy (from taxpayers to bondholders), not a net resource drain to or from the future.
Mankiw, Feldstein, and Rosen are all well-known economists/textbook authors, but none of them is specifically credited as the originator of this particular argument — Feldstein, in fact, is better known for arguing that debt can burden future generations under certain conditions (crowding out capital formation), a contrasting position.
Therefore the answer is (D) A. P. Lerner.
The trap: (B) Martin Feldstein
Martin Feldstein is a prominent, frequently-cited name in public debt discussions, which can make him feel like a 'safe' choice for students who recall the topic generally but not the specific attribution — but Feldstein's own work leans toward the opposite conclusion (debt can burden future generations), making him an easy but incorrect pick here.
Public expenditure and public debt has come up 29 times in 6 exams since 2012.
What this question tests
This question is on Public debt: burden, classification and crowding out, part of Public expenditure and public debt in Public Economics.
The classical and modern views of public debt and what it costs.
TestStop has 8 past-paper questions on this subtopic.
Question from the GATE 2023 paper. Solutions are TestStop's own. Not affiliated with or endorsed by any examination authority.