Which of the following statement/statements are true?
Statement 1: By taxation, the government transfers the burden of reduced consumption on future generations.
Statement 2: Government borrowing from the people reduces the savings available to the private sector.

Statement 2 is true and Statement 1 is false

The correct answer is option 4: Statement 2 is true and Statement 1 is false

Statement 1: By taxation, the government transfers the burden of reduced consumption on future generations. This is incorrect. This suggests that government taxation transfers the burden of reduced consumption to future generations. While current taxation can affect economic conditions, it doesn’t necessarily mean future generations will bear that burden directly. On the other hand, by borrowing, the government transfers the burden of reduced consumption on future generations.

Statement 2: Government borrowing from the people reduces the savings available to the private sector. This is true. When the government borrows from the people, it competes with the private sector for loanable funds. This can drive up interest rates and make it more expensive for businesses and individuals to borrow money. As a result, the savings available to the private sector may decrease, potentially limiting investment and economic growth.