Financing government expenditure through deficits rather than through taxes will lead to higher spending if
A) people are more aware of taxes than they are of deficits.
B) people are more aware of deficits than they are of taxes.
C) it results in crowding out.
D) it results in crowding in.

Question

Quizplus · Accepted Answer

Financing government expenditure through deficits rather than taxes leads to higher spending if people are more aware of taxes than they are of deficits. This is because when taxes are raised to finance spending, the immediate cost to taxpayers is more visible and tangible, leading to potential resistance or reduced consumption. In contrast, deficit financing can mask the immediate cost, making the public less likely to reduce their spending in response.

Financing Government Expenditure Through Deficits Rather Than Through Taxes Will