While scanning the movies section in your local online newspaper, you click on the business section by mistake. While you're there, you quickly scan a report that says government spending will again exceed tax revenues in the current year. This means that the:
A) total national debt is likely to increase.
B) national deficit is likely to decrease.
C) rate of inflation is likely to fall.
D) monetary policies pursued by the Fed need tightening.

Question

Quizplus · Accepted Answer

When government spending exceeds tax revenues, it leads to a budget deficit, which will increase the total national debt. This means that the country is borrowing more money than it is making, and the debt is likely to continue to rise. Therefore, option A is the correct choice. Option B is incorrect because the national deficit would increase, not decrease. Option C is incorrect because a budget deficit typically leads to inflation, not a decrease in inflation. Option D is incorrect because the Federal Reserve's policies may need to focus on other issues, such as stimulating economic growth, rather than tightening monetary policies.

While Scanning the Movies Section in Your Local Online Newspaper