Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
It decreases national debt and lowers inflation during a recession.
B
It may increase national debt, potentially raise inflation rates, and can exacerbate economic recession.
C
It has no impact on national debt or inflation during a recession.
D
It only affects inflation without any impact on national debt or recession.
Understanding the Answer
Let's break down why this is correct
Answer
When a government runs a budget deficit, it means it spends more money than it collects in taxes. To cover this gap, the government often borrows money, which increases the national debt. For example, if a government needs to build new schools but doesn't have enough tax revenue, it might take out loans, raising its total debt level. Over time, if the debt grows too large, it can lead to inflation, as the government may print more money to pay it off, causing prices to rise. Additionally, if the economy slows down, high debt can lead to recession, as the government may cut spending or raise taxes to manage the debt, which can further reduce economic activity.
Detailed Explanation
When the government spends more than it earns, it borrows money. Other options are incorrect because This option suggests that deficits decrease national debt, which is not true; This choice says deficits have no effect, which is misleading.
Key Concepts
national debt
inflation
economic recession
Topic
Government Budget Deficits
Difficulty
hard level question
Cognitive Level
understand
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