When the Government Finances Its Expenditures by Borrowing from Consumers

question 54

Multiple Choice

When the government finances its expenditures by borrowing from consumers and business firms

• A) it creates a surplus.
• B) it is more inflationary than if it borrows from the central bank.
• C) it creates new money, making the deficit greater than it would otherwise have been.
• D) the national debt goes down.
• E) interest rates rise, reducing private investment spending.

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