When the government borrows funds in order to pay for its current expenditures,
A) the government will have to repay the borrowed funds within five years.
B) the government can spend without having to increase taxes, either now or in the future.
C) future taxes will have to be higher in order to pay the interest on the borrowed funds.
D) the cost imposed on the private sector is virtually eliminated because taxes can remain constant.

Question

Quizplus · Accepted Answer

When the government borrows funds, it incurs debt that must be serviced, typically through interest payments. To cover these interest payments, future taxes may need to be increased unless the government finds other revenue sources or reduces spending.

When the Government Borrows Funds in Order to Pay for Its