If the inflation rate falls, what will happen to the budget deficit?
A)It will rise, because government spending will rise.
B)It will rise, because interest payments will rise.
C)It will fall, because tax receipts will increase.
D)It will fall, because interest payments will fall.

Question

Quizplus · Accepted Answer

If the inflation rate falls, interest rates typically decrease, leading to lower interest payments on government debt, which can reduce the budget deficit.

If the Inflation Rate Falls, What Will Happen to the Budget