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What will occur if the federal government runs a budget deficit?When the government runs a deficit, the debt increases; when the government runs a surplus, the debt shrinks. Three measures of the debt are: Debt held by the public measures the government's borrowing from the private sector (including banks and investors) and foreign governments.
What happens when a budget deficit occurs?A budget deficit can lead to higher levels of borrowing, higher interest payments, and low reinvestment, which will result in lower revenue during the following year. The opposite of a budget deficit is a budget surplus.
Which of the following will happen when the government increases its budget deficit?Answer and Explanation: C. The interest rate rise and domestic investment falls. Reason: Budget deficit indicates that the government purchases are greater than the government revenues.
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