Which of the following statements is TRUE of the global debt crisis?
A) Fiscal imbalances are the least important source of risk and uncertainty in the global business environment.
B) The smallest proportion of government debt results from national pension and healthcare programs.
C) Debt has substantially decreased in major advanced economies mainly due to excessive government spending.
D) When a government tries to pay down its debt, money is drawn out of the national money supply, which hinders economic activity and reduces tax revenues.

Question

Quizplus · Accepted Answer

D is true because when a government attempts to reduce its debt, it often does so by decreasing spending or increasing taxes. Both actions can lead to a reduction in the overall money supply within the economy, which can dampen economic activity. This reduction in economic activity can lead to lower tax revenues, making it more challenging to pay down the debt.

Which of the Following Statements Is TRUE of the Global