![]() ![]() The task of the question is indicated by the phrase the author disagrees with all of the following EXCEPT. The subject of this question is unknown, since there are no key words in the question. The phrase can be inferred in the question stem indicates that this is an inference question. It can be inferred from the passage that the author disagrees with all of the following EXCEPT While it is possible for deficit spending to reach exorbitant levels, there is such a thing as a healthy deficit.ģ. Since government spending had helped ease the Depression, the slowdown in spending helped cause a revival of that economic nightmare. Roosevelt half-heartedly tried to slow government spending and balance the budget. The last president who seriously tried to balance the United States federal budget was Herbert Hoover the Depression ensued. Corporate and private lending actually increased in fact, many of the problems of the decade were due to an overabundance of credit, which encouraged questionable investments, rather than to the large deficit. In addition to the rate drop, the supply of funds available for lending remained steady, contradicting the contention that the deficit always has a negative economic impact. For example, during the 1980s, the United States budget deficit grew at an unprecedented rate, yet inflation dropped 6.5 percent to 2.9 percent, and interest rates dropped just as dramatically. What about the argument that deficits have an adverse effect on the economy? Some facts indicate otherwise. Why do so many countries obligingly enact economic policies favorable to the United States? Because these governments hold sizable United States bond portfolios, and so have a vested interest in long-term American economic health. United States debt is largely covered by the sale of government bonds, which are popular not only with United States citizens but also with foreign countries. For one, they do not acknowledge that debt can also be viewed, ironically, as an asset. Finally, they contend, the deficit eats up funds that could otherwise be lent to private businesses, whose use of such funds would help expand the economy.Ĭritics of the deficit ignore several issues. Economists argue further that the deficit prevents government programs that would not only help its citizens but, through investment, would also help the economy. The argument goes: the government is spending not only its current income but tomorrow’s as well. It is commonplace among American economists today to insist that the United States’ government budget deficit-the amount spent annually in excess of tax revenues-has a uniformly destructive effect on the national economy. ![]()
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