2. Which one of the following statements about government deficits is not true?

Question

2. Which one of the following statements about government deficits is not true? a) Larger government budget deficits can lead to higher interest rates. b) Even if crowding out does not occur, large budget deficits may result in reliance on foreign sources of funds to finance the deficit. c) Larger government budget deficits may crowd out private investment that might have led to more growth than public investment. d) Government budget deficits tend to increase during expansions and decrease during recessions.

Explanation / Answer

d) Government budget deficits tend to increase during expansions and decrease during recessions.

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