If the economy is in a recession,
A)It is operating inside the production possibilities curve,and the opportunity cost of deficit spending is zero.
B)Deficit spending will not increase the size of the debt because interest rates will be falling.
C)The economy suffers from structural unemployment,which can be alleviated by debt refinancing.
D)Larger deficits will decrease the national debt.

Question

Quizplus · Accepted Answer

During a recession, the economy operates inside the production possibilities curve because resources are underutilized. The opportunity cost of deficit spending is low or zero because the economy is not at full capacity, meaning resources that would otherwise be idle can be employed without sacrificing other goods and services.

If the Economy Is in a Recession