For the federal deficit to be lowered

Question

Quizplus · Accepted Answer

When the federal government's expenditures are lower than its tax revenue, it generates a surplus which can then be used to pay down the deficit. In contrast, if the government spends more than it takes in through taxes, it contributes to the deficit. Option A is incorrect as increasing net exports would require other countries to buy more American goods and services which is dependent on the overall strength of the economy. Option C is incorrect as raising interest rates would slow economic activity and potentially worsen the deficit, while lowering the required reserve ratio would increase the amount of money banks can lend and stimulate economic growth. Option D is also incorrect as reducing the money supply could lead to a recession and worsen the deficit.

For the Federal Deficit to Be Lowered