A serious burden of a budget deficit and an increase in the national debt comes on the supply side because large budget deficits
A)discourage consumption and therefore lead to production cutbacks.
B)lead to lower interest rates and therefore to excessive optimism by consumers and businesspeople.
C)discourage investment and therefore may reduce the growth of the nation's capital stock.
D)discourage foreign investment and therefore limit employment opportunities.

Question

Quizplus · Accepted Answer

Large budget deficits can lead to higher interest rates which can discourage investment, especially long-term investment. This can result in a reduction in the growth of the nation's capital stock, which is a key component of supply-side economics. Additionally, large budget deficits can cause uncertainty about future fiscal policy, which can discourage businesses from making long-term investments.

A Serious Burden of a Budget Deficit and an Increase