📚 Learning Guide
Fiscal Policy and National Debt
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How can a government use fiscal policy to stimulate economic growth in the context of rising national debt?

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Learning Path
Learning Path

Question & Answer
1
Understand Question
2
Review Options
3
Learn Explanation
4
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Choose the Best Answer

A

By increasing taxes and reducing spending

B

By increasing government spending and cutting taxes

C

By decreasing government spending and increasing interest rates

D

By maintaining a balanced budget and reducing public services

Understanding the Answer

Let's break down why this is correct

Answer

Fiscal policy is how a government uses its spending and taxes to influence the economy. When a government wants to stimulate economic growth, it can increase spending on things like infrastructure, education, or healthcare. This spending creates jobs and puts money in people's hands, which helps businesses grow as people spend more. However, if the national debt is rising, the government must be careful about how it borrows money to fund this spending, as too much debt can lead to higher interest rates and financial problems in the future. For example, if a government invests in building new roads, it can help more people get to work, which boosts the economy, but it should also plan to manage the debt responsibly to avoid future issues.

Detailed Explanation

When the government spends more and cuts taxes, people have more money to spend. Other options are incorrect because Some might think that raising taxes and cutting spending will help pay off debt; People might believe that cutting spending and raising interest rates will help the economy.

Key Concepts

Economic stimulus
Monetary policy
Topic

Fiscal Policy and National Debt

Difficulty

medium level question

Cognitive Level

understand

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