If the economy is in a recession,
A)It is operating inside the production possibilities curve,and the opportunity cost of deficit spending is zero.
B)Deficit spending will not increase the size of the debt because interest rates will be falling.
C)The economy suffers from structural unemployment,which can be alleviated by debt refinancing.
D)Larger deficits will decrease the national debt.

Question

Quizplus · Accepted Answer

During a recession, the economy operates below its potential, inside the production possibilities curve, meaning resources are underutilized. Deficit spending can help stimulate demand without immediate opportunity costs.

If the Economy Is in a Recession