When Analyzing the Impact of a Budget Deficit, an Economist

question 13

Multiple Choice

When analyzing the impact of a budget deficit, an economist will focus on

• A)strictly the amount borrowed.
• B)strictly the inflation adjusted amount borrowed.
• C)strictly the ratio of the deficit to GDP (it doesn't matter what is purchased with the borrowed money).
• D)the ratio of the deficit to GDP and whether what is purchased with the borrowed money can be considered an investment.

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Definitions:

Inflation Rate

The percentage rate at which the general level of prices for goods and services is rising.

Consumption Spending

The expenditure by households on goods and services, excluding purchases of new housing, which is a key component in calculating a country's gross domestic product (GDP).

Permanent Tax

A tax implemented with no predetermined end date, often considered to be indefinitely applied.

Temporary Tax

A temporary tax is a levy imposed by a government for a specific period before it is automatically revoked or reassessed.