Suppose a country has been running a persistent government budget deficit. If the deficit is reduced, but remains positive,
A) interest payments on the debt immediately will decrease.
B) government debt will decrease.
C) the country will experience a budget surplus.
D) government debt will increase.

Question

Quizplus · Accepted Answer

When a country reduces its budget deficit but it remains positive, it means the government is still spending more than it earns, leading to an increase in government debt, albeit at a slower rate.

Suppose a Country Has Been Running a Persistent Government Budget