Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
It decreases national debt by reducing the need for borrowing
B
It has no impact on national debt
C
It increases national debt if financed through borrowing
D
It eliminates national debt entirely
Understanding the Answer
Let's break down why this is correct
Answer
When the government increases spending, it often borrows money to pay for those expenses, especially if it doesn't have enough revenue from taxes. This borrowing adds to the national debt because the government is taking on more loans that it needs to pay back in the future. For example, if a government decides to build new schools and does not raise taxes to fund it, it might issue bonds to raise the necessary funds. As more bonds are sold, the total national debt grows because the government is committed to repaying those amounts later. Therefore, while increased government spending can stimulate the economy, it usually leads to a higher national debt if not balanced by increased revenue.
Detailed Explanation
When the government spends more money, it often needs to borrow to pay for it. Other options are incorrect because Some might think that spending less means borrowing less; It's a common belief that spending doesn't change debt.
Key Concepts
Fiscal policy
National debt
Topic
Fiscal Policy and National Debt
Difficulty
medium level question
Cognitive Level
understand
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