Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
It may lead to higher inflation
B
It will always reduce unemployment
C
It guarantees future tax cuts
D
It ensures immediate economic growth
Understanding the Answer
Let's break down why this is correct
Answer
When a government increases its national debt through fiscal policy, its primary concern is the long-term impact on the economy. This means that borrowing money can help fund important projects like schools and roads, but if the debt grows too large, it can lead to higher interest payments that take away money from other important services. For example, if a country borrows a lot to pay for infrastructure, it might have to cut back on healthcare or education later on because it needs to pay back the loans. Additionally, a high national debt can make investors worried, which might lead them to demand higher interest rates, making future borrowing more expensive. Ultimately, the government must balance the immediate benefits of spending with the future costs of repaying that debt.
Detailed Explanation
When a government borrows money, it can lead to higher prices for goods and services. Other options are incorrect because Some think that borrowing money will always create jobs; Many believe that more debt means lower taxes in the future.
Key Concepts
National debt
Topic
Fiscal Policy and National Debt
Difficulty
easy level question
Cognitive Level
understand
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