When there are credit-market imperfections,an increase in government debt may be advantageous because it

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When there are credit-market imperfections, some consumers may be credit-constrained and unable to borrow as much as they would like. This can lead to lower consumption and investment levels, which can limit economic growth. By increasing government debt, the government can increase spending and provide more support for credit-constrained consumers, enabling them to consume more. This can help stimulate economic activity and growth. However, it is worth noting that increasing government debt also has potential downsides, such as higher interest payments or inflation, which can create their own problems.

When There Are Credit-Market Imperfections,an Increase in Government Debt May