ECONOMICS
AGGREGATE DEMAND
Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Increased private sector debt
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Reduced unemployment benefit payments and increased tax base
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Firms profits increase
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Increases demand for UK firms’ products
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Detailed explanation-1: -Low inflation, higher income: Helping the rise in private consumption is the fall in inflation. Consumer Price Inflation (CPI), which measures the rise in retail prices of goods and services, is down to 5.1% in January from 8.6% in April last year-the highest in this fiscal year.
Detailed explanation-2: -There are at least four separate consequences of rising debt that can adversely affect the current and subsequent performance of an economy. These include transfers, financial distress, bezzle (or fictional wealth), and additional spillover adjustment costs termed hysteresis.
Detailed explanation-3: -Excessive debts are caused by the misuse of revenue, tax cuts, tax relaxations, low revenue from taxes, natural calamities, and disasters. However, public debt burdens the national expenditure. On top of the principal amount, the government has to pay interest for the loans-installments are hefty.
Detailed explanation-4: -Reduced Public Investment. As the federal debt mounts, the government will spend more of its budget on interest costs, increasingly crowding out public investments. Over the next 10 years, the Congressional Budget Office (CBO) estimates that interest costs will total $10.5 trillion under current law.