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Chapter 14: Q. 3 (page 319)

It may be argued that the effects of a higher public debt are the same as the effects of a higher deficit. Why?

Short Answer

Expert verified

As a result, a fiscal deficit results to a public debt.

Step by step solution

01

Public investment.

Remember that a bigger public debt is the amount that the government owes the people for public investments in the stock market.

Deficit, on the other hand, is a budget shortfall caused by spending exceeding revenue or revenues.

02

Fiscal deficit.

In this situation, a budget deficit results in a large public debt because the government urges the public to invest in government securities, resulting in public debt.

As a result, a budget deficit leads to a public debt.

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Most popular questions from this chapter

In 2019, government spending is\(4.3trillion, and taxes collected are\)3.9 trillion. What is the federal government deficit in that year?

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