ECONOMICS
BUDGET DEFICITS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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a budget deficit
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a budget surplus
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an increase in the money supply
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an increase in tax revenues
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Detailed explanation-1: -Tax cuts, stimulus programs, increased government spending, and decreased tax revenue caused by widespread unemployment generally account for sharp rises in the national debt.
Detailed explanation-2: -The two main causes of a budget deficit are excessive government spending and low levels of taxation that don’t cover expenditure. Tax cuts can cause declines in revenue can result in a budget deficit, or, a massive fiscal stimulus can increase government spending over and above the income it receives.
Detailed explanation-3: -The primary deficit adds to the national debt and the positive difference between the interest rate and the growth rate of GDP means that the interest payments alone cause the debt to rise faster than GDP.
Detailed explanation-4: -To pay for government programs while operating under a deficit, the federal government borrows money by selling U.S. Treasury bonds, bills, and other securities. The national debt is the accumulation of this borrowing along with associated interest owed to investors who purchased these securities.