Question

COnnect Assignment # Question 7 (of 10 7. vaue 10.00 points You hear on the Nightly News that the prime minister hes vowed to decrease the nation's debt. "Well have to buckle down and leam to do without, both the government and private citizens he says In order to reduce its debt, a nation must O nun lower surpluses decrease tax rates run lower deficits increase govemment spending Debt reduction will result in fewer public works projects. higher transfer payments, and more money available for households to spend more public works projects, lower transfer payments, and less money available for households to spend more public works projects, higheer transler payments, and more money available for households to spend. fewer public works projects, lower trasler payments, and less money available for households to spend References eBook & Resources Multiple Choice Section Revenue and Spending Learning Objective: 12-05 Describe how revenue and spending determine a government budget Section The Buoget Detict

Answer 1

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Debt gets accumulated when there is an increasing deficit or reducing surplus. Hence by increasing taxes or reducing government spending, government is likely to raise surplus or reduce its deficit to reduce national debt

Also when taxes are increased or government spending decreases, national income falls as AD shifts left. This reduces the spending of households, however, government will also reduce its spending on public work projects.