Question

True/False? If False, Why?

1_General obligation bonds are less restrictive than revenue backed bonds with few limitations regarding the amount that can be issued.

2_When issuing revenue backed bonds, receipts from all issuing governments sources are pledged to pay the interest and principal back to the bond purchasers.

3_The theory of tax expenditures is what drives the rationale for investors to purchase State/local bonds of either type (general obligation/revenue backed)

4_The Federal American Recovery Act, signed into law by President Obama, provided a mechanism that achieved the goals of federal grant policy by correcting for externalities and providing for a macroeconomic stabilizing mechanism.

5_Intergovernmental grants do not provide a mechanism in which you can effectively substitute the granting government’s tax revenue for that of the recipient government.

6_Financing government expenditure through a user fee is similar to tax financing because in both revenue streams there is always a direct relationship between the amount of payment and the level of service received.

Answer 1

1 ans ) true

general obligation bonds are good and safe.They are less risky than revenue bonds.They have high level of safety and they are more attractive due to their higher credit rating.

2 ans) true

when Governments have power to pay taxes revenue bonds are pledged to back the bond purchasers.

3 ans) true

General obligation bonds depend on taxation.Income from revenue source such as higher education system is supported by revenue bonds.

4 ans ) true

President Obama signed the federal American Recovery act Providing a macroeconomic stabilizing mechanism.The economy in the short run is stimulated with the help of this act for long term education.

5 ans ) true

intragovenmental grants do not provide mechanism and the federal government is expected to provide granting mechanisms to state and local governments.

6 ans ) true

In both streams there is direct relationship between amount of payment and the level of service recieved.when government makes repayment from tax revenue the tax liability increases.taxes and non taxes are included in government revenue.