Question

6 multiple choice 1 point as you are reading the online edition of your local newspaper, you quickly scan a report in the business section that says government spending will again exceed tax revenues in the current year. what does this mean for the economy? the monetary policies pursued by the fed need tightening. the total national debt is likely to increase. the rate of inflation is likely to fall. the national deficit is likely to decrease.

Explanation:

• Option 1: Monetary policy (Fed's policies) relates to money supply/interest rates, not directly to government spending vs tax revenues (fiscal policy). Eliminate.
• Option 2: If government spending > tax revenues, there's a deficit. To finance the deficit, the government borrows, increasing the national debt (sum of all past deficits). This is correct.
• Option 3: Increased government spending (if deficit spending) can boost demand, potentially increasing inflation, not decreasing it. Eliminate.
• Option 4: A deficit is spending - tax revenues. If spending exceeds taxes, the deficit is present; if this happens again, the deficit is likely to stay or increase, not decrease. Eliminate.

Answer:

B. The total national debt is likely to increase.