Chronic budget deficits can lead to all of the following, except:

Question

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Chronic budget deficits can lead to over-allocation of resources to the government sector, which means the government may have to borrow more to finance its spending, dampening private investment. It can also lead to investors losing faith in the government's ability to repay its debts, and the government may be forced to make drastic cuts in its spending. However, it is unlikely to result in "Smaller government" in the economy as chronic budget deficits usually result in the government expanding its role in the economy to meet the shortfall.

Chronic Budget Deficits Can Lead to All of the Following