1. The government's debt is relatively low, but the government is running a large budget deficit as it builds a high-speed rail system to connect the major cities of the nation.
2. The government's debt is relatively high due to a recently ended deficit-financed war, but the government is now running only a small budget deficit.
3. The government's debt is relatively low, but the government is running a budget deficit to finance the interest payments on the debt.
Well, the first two indicate government spending which circulates money in the economy leading to a higher GDP. The third one indicates a deficit not due to government spending. The third one would have more of an impact on the economy so I would say the third one would indicate what you had asked.
the third seems most likely because of the risk implication, as the gov is using a budget deficit to finance interest.
No comments:
Post a Comment