7
QuizMultiple Choice

Entrepreneurship — Unit test

Question 7 • IL-Economics

What part does interest play in deficit spending?

Answer
A
Governments must pay interest on money they borrow when they take on debt.
B
Citizens must pay interest when their governments borrow money.
C
Governments may charge foreign countries interest when they borrow money.
D
Interest is not a factor when a government’s budget is in deficit.

Explanation

When a government spends more than it collects in revenue, it may borrow money to cover the deficit. Borrowing creates debt, and the government generally has to pay interest to its lenders. Therefore, the correct choice is that governments must pay interest on money they borrow when they take on debt.

AI-written and checked against the verified answer.

Previous
Next