When There Are Credit-Market Imperfections, an Increase in Government Debt

question 31

Multiple Choice

When there are credit-market imperfections, an increase in government debt may be advantageous because it

• A) discourages credit-constrained consumers from borrowing too much.
• B) allows credit-constrained consumers to borrow more.
• C) eliminates the problems that cause credit-market imperfections.
• D) encourages more private saving.

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Definitions:

Economic Harm

Damage or detriment to one's financial condition or prospects.

Physical Injury

Bodily harm or damage that a person suffers due to an accident, violence, or other incident.

Proximate Cause

The primary reason or event that directly leads to an injury or damage, and without which the injury or damage would not have occurred.

Zone Of Danger

A legal doctrine that outlines the area within which a person can recover damages if they were put at risk of physical harm by someone else's negligence.