Critics of the government's fiscal policies argued that government deficits
A)prevented capital from flowing into the United States.
B)were linked to the excess of imports over exports that occurred in the 1980s.
C)caused the level of unemployment in the United States to increase during the 1980s.
D)had directly contributed to a decline in the level of demand in the American economy.

Question

Quizplus · Accepted Answer

Government deficits can lead to an increase in domestic borrowing, which can drive up interest rates and attract foreign capital, leading to a stronger currency. This can make imports cheaper and exports more expensive, contributing to a trade deficit, where the value of imports exceeds that of exports. This was a notable issue in the 1980s in the United States.

Critics of the Government's Fiscal Policies Argued That Government Deficits