23
practice examMultiple Choice

Practice Exam

Question 23 • Economics

What part does interest play in deficit spending?

Answer
A
Governments may charge foreign countries interest when they borrow money.
B
Governments must pay interest on money they borrow when they take on debt.
C
Citizens must pay interest when their governments 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 has a deficit and may borrow money to cover the difference. Borrowing creates debt, and the government must pay interest to its lenders. Citizens do not directly owe interest simply because their government borrows, so choice A is correct.

AI-written and checked against the verified answer.

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