Critically evaluate the statement, "Budget deficits can only be bad for a country."
What will be an ideal response?
The statement is not correct. One time when running a budget deficit can be good for a country involves the case of automatic stabilizers. When the economy goes into recession, tax revenue falls and social insurance payments go up, softening the recession but also increasing the deficit. Those who believe in Ricardian Equivalence might also argue that budget deficits do not matter.
You might also like to view...
Explain what the slope of the income consumption curve shows about the income elasticity of demand
What will be an ideal response?
In a market where the price is restricted by price floors or price ceilings,
a. all sellers will be able to sell everything they produce. b. surpluses and shortages will exist. c. all buyers will get what they want. d. disequilibrium will automatically correct itself. e. surpluses and shortages will put pressure on the price to move to its equilibrium.