📚 Learning Guide
Fiscal Policy and National Debt
hard

Fiscal policy primarily aims to influence the economy through adjustments in __________, which can lead to changes in national debt levels.

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Learning Path
Learning Path

Question & Answer
1
Understand Question
2
Review Options
3
Learn Explanation
4
Explore Topic

Choose the Best Answer

A

interest rates

B

government spending and taxation

C

trade balances

D

foreign exchange rates

Understanding the Answer

Let's break down why this is correct

Answer

Fiscal policy primarily aims to influence the economy through adjustments in government spending and taxation. When the government decides to spend more money on things like roads, schools, or healthcare, it can help create jobs and boost economic activity. Conversely, if the government raises taxes, it can slow down spending by individuals and businesses, which might help control inflation. However, when the government consistently spends more than it collects in taxes, it can lead to an increase in national debt. For example, if a country spends a lot on infrastructure projects but does not raise taxes to cover those costs, it may borrow money, which increases its national debt.

Detailed Explanation

Fiscal policy is about how the government uses money. Other options are incorrect because Some might think interest rates are the main tool for fiscal policy; People may confuse trade balances with fiscal policy.

Key Concepts

Fiscal Policy
National Debt
Economic Growth
Topic

Fiscal Policy and National Debt

Difficulty

hard level question

Cognitive Level

understand

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