Question #310

Rising public debt levels at constant interest rates increase the volume of interest servicing payments that have to be made. These payments will

• reduce the room $-for-$ for other non-inflationary discretionary deficit spending because they will "fill up the spending gap" more quickly.
• reduce the capacity of the private sector to save because they will require cuts backs in the deficit to support the repayments.
• not reduce the room $-for-$ for other non-inflationary discretionary deficit spending because increasing imports will keep opening the spending gap that has to be "filled".

Answer #2141

Answer: not reduce the room $-for-$ for other non-inflationary discretionary deficit spending because increasing imports will keep opening the spending gap that has to be "filled".

Explanation

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