Golden Rule

AAA

DEFINITION of 'Golden Rule'

The Golden Rule, as it pertains to government spending, stipulates that a government will borrow to invest, not to finance existing spending. In other words, the government should borrow money only to fund investments that will benefit future generations, and current spending must be covered by existing taxes.

INVESTOPEDIA EXPLAINS 'Golden Rule'

The term originates from ancient writings, including the New Testament, the Talmud and the Koran. Each has a story that teaches the Golden Rule: do unto others as you would have them do unto you. In fiscal policy, the Golden Rule seeks to protect future generations from debt by limiting borrowed money to investments, and not to indebt future generations for the benefit of current generations.

RELATED TERMS
  1. Fiscal Policy

    Government spending policies that influence macroeconomic conditions. ...
  2. Taxation

    Taxation refers to the act of a taxing authority actually levying ...
  3. Monetary Policy

    The actions of a central bank, currency board or other regulatory ...
  4. Monopoly

    A situation in which a single company or group owns all or nearly ...
  5. Government Purchases

    Expenditures made in the private sector by all levels of government, ...
  6. Economics

    A social science that studies how individuals, governments, firms ...
Related Articles
  1. What Is Fiscal Policy?
    Economics

    What Is Fiscal Policy?

  2. Do Tax Cuts Stimulate The Economy?
    Taxes

    Do Tax Cuts Stimulate The Economy?

  3. Current Account Deficits: Government ...
    Budgeting

    Current Account Deficits: Government ...

  4. What Caused The Great Depression?
    Economics

    What Caused The Great Depression?

comments powered by Disqus
Hot Definitions
  1. Correlation

    In the world of finance, a statistical measure of how two securities move in relation to each other. Correlations are used ...
  2. Letter Of Credit

    A letter from a bank guaranteeing that a buyer's payment to a seller will be received on time and for the correct amount. ...
  3. Due Diligence - DD

    1. An investigation or audit of a potential investment. Due diligence serves to confirm all material facts in regards to ...
  4. Certificate Of Deposit - CD

    A savings certificate entitling the bearer to receive interest. A CD bears a maturity date, a specified fixed interest rate ...
  5. Days Sales Of Inventory - DSI

    A financial measure of a company's performance that gives investors an idea of how long it takes a company to turn its inventory ...
  6. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable ...
Trading Center