When countries have severe debt problems:
A) fiscal policy is an especially good idea.
B) expansionary fiscal policy can reduce real growth.
C) it makes no difference for fiscal policy.
D) they can continue to borrow forever without any adverse consequences.

Question

Quizplus · Accepted Answer

When countries have severe debt problems, expansionary fiscal policy can lead to increased borrowing and higher interest rates, which may reduce real growth. Therefore, fiscal policy needs to be carefully balanced and targeted to address specific debt-related issues rather than just expanding spending or reducing taxes.

When Countries Have Severe Debt Problems