What is a benefit of giving the government freedom to run a deficit?
A) It allows the government to be flexible if something unexpected happens.
B) Government spending does not cause inflation.
C) Discretionary spending quickly responds to changes in the economy.
D) The government has precise information on how much spending needs to increase to restore potential output.

Question

Quizplus · Accepted Answer

Allowing the government to run a deficit gives them the flexibility to respond to unexpected events such as a natural disaster or economic downturn. They can spend more money without waiting for revenue to come in, which can help cushion the impact of these events on the economy. However, it is worth noting that running a deficit over a prolonged period of time could lead to long-term negative consequences for the economy.

What Is a Benefit of Giving the Government Freedom to Run