Asked by Stacie Batchelor on Jun 19, 2024
Verified
The opportunity cost of borrowing funds to finance government deficits is
A) greatest when the economy is doing well.
B) greatest when the economy is in a recession.
C) zero.
D) the same regardless of the state of the economy.
Opportunity Cost
The financial impact of rejecting the subsequent optimal choice when deciding.
Government Deficits
The financial situation in which a government's expenditures exceed its revenues within a given period, leading to borrowing or currency emission.
- Comprehend the financial repercussions of governmental debt acquisition.
Verified Answer
BY
binay yadavJun 22, 2024
Final Answer :
A
Explanation :
The opportunity cost of borrowing funds to finance government deficits is greatest when the economy is doing well because in a strong economy, borrowing competes with private investment, potentially leading to higher interest rates and crowding out private investment.
Learning Objectives
- Comprehend the financial repercussions of governmental debt acquisition.
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