Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
They can stimulate economic growth by increasing government spending.
B
They always hinder economic growth regardless of circumstances.
C
They have no impact on economic growth.
D
They can only stimulate growth in the short term.
Understanding the Answer
Let's break down why this is correct
Answer
Government budget deficits happen when a government spends more money than it collects in taxes. This can lead to borrowing money, which means the government has to pay interest on its debt. When a government borrows a lot, it can reduce the amount of money available for businesses and people to borrow, which can slow down economic growth. For example, if a government spends heavily on infrastructure projects, it might create jobs and stimulate the economy in the short term, but if it leads to high debt, it could mean higher taxes or less spending on services in the future. Therefore, while deficits can sometimes boost the economy temporarily, they can also create challenges for long-term growth.
Detailed Explanation
When the government spends more money than it earns, it can boost the economy. Other options are incorrect because Some people think that deficits always hurt the economy; The idea that deficits have no effect is a common misunderstanding.
Key Concepts
economic growth
Topic
Government Budget Deficits
Difficulty
easy level question
Cognitive Level
understand
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