In the long-run deficits are likely to cause:

Question

Quizplus · Accepted Answer

Long-term deficits can lead to a higher trade deficit as a country borrows more from other countries to finance their budgetary needs. This leads to an increase in the country's external debt and can result in a higher trade deficit. Deficits are not likely to cause a higher future GDP, as they may lead to a growing debt burden that ultimately reduces investment and future economic growth. Deficits may result in a lower rate of inflation due to decreased demand, but this may not be sustained in the long run. Deficits may also lead to increased trade instability, rather than stability, as a result of growing external debt and the risk of default.

In the Long-Run Deficits Are Likely to Cause