The economic meaning of the intertemporal budget constraint is that: a- the government’s budget never has to balance. b- the government’s budget must balance period by period. c- the present discounted value of the government’s budget must balance. d- the government can always push its debt on future generations. e- every generation faces the same tax schedule.

The economic meaning of the intertemporal budget constraint is that:
a- the government’s budget never has to balance.
b- the government’s budget must balance period by period.
c- the present discounted value of the government’s budget must balance.
d- the government can always push its debt on future generations.
e- every generation faces the same tax schedule.

Answer

• c- the present discounted value of the government’s budget must balance.
  Explanation:

• The government’s intertemporal budget constraint states that the budget must balance in the present discounted value sense.
• What this means is that the discounted tax value at the present time, should balance or be equal to the discounted spending value at the present.
• This happens given that the economy begins with no debt and there is any debt, then the revenue from taxes must be greater than the total spending.

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