Question

Which statement accurately describes the effect of the federal government rapidly reducing government expenditures?

A Inflation will increase because more money will circulate in the economy.
B National debt will increase because a deficit will develop in the federal budget.
C Economic activity will increase because businesses will have more money to spend.
D Unemployment rates will increase because federal spending makes up a large part of the economy.

Answer 1

The statement which accurately describes the effect of the federal government rapidly reducing government expenditures is D.Unemployment rates will increase because federal spending makes up a large part of the economy. Since the goverment keeps up money for particular economic expenses, it means that the salaries will be decreased and the level of firing people wold decrease. Therefore, companies will not be able to offer a escent salary to their new empoyees which means that unemployment rate will grow.