Which of the following statements regarding government fiscal policy are correct? Assume ceteris paribus. a) The government's debt to GDP ratio will be increasing if there is a primary budget deficit. # b) Higher spending on interest payments increases government debt but does not increase the primary deficit. c) In a recession, a government using fiscal policy to stabilize aggregate demand will design its policy to override the automatic stabilizers. ♦
Which of the following statements regarding government fiscal policy are correct? Assume ceteris paribus. a) The government's debt to GDP ratio will be increasing if there is a primary budget deficit. # b) Higher spending on interest payments increases government debt but does not increase the primary deficit. c) In a recession, a government using fiscal policy to stabilize aggregate demand will design its policy to override the automatic stabilizers. ♦
Chapter21: Fiscal Policy
Section: Chapter Questions
Problem 3SQP
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Transcribed Image Text:Which of the following statements regarding government fiscal policy are correct? Assume ceteris paribus.
a) The government's debt to GDP ratio will be increasing if there is a primary budget deficit.
+
b) Higher spending on interest payments increases government debt but does not increase the primary deficit.
c) In a recession, a government using fiscal policy to stabilize aggregate demand will design its policy to override the automatic
stabilizers.
◆
+
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