If, when there is full employment, the federal government increases its spending without increasing its tax revenues, generally:
1. an increase in employment will occur
2. a serious depression will occur
3. the national debts will occur
4. inflation will occur
Is choice 3 correct???
I think both 3 and 4 are correct. That said, as written, 3 is the obvious choice.
No, choice 3 is not correct. When the federal government increases its spending without increasing tax revenues, it typically leads to a budget deficit, which means the government's expenses exceed its income. This can result in an increase in the national debt over time if the deficit continues. However, it is important to note that an increase in government spending alone does not necessarily guarantee an increase in the national debt. The government can still finance its spending through other means such as borrowing or selling government bonds.
The correct answer to your question is choice 4: inflation will occur. When the government increases spending without increasing tax revenues, it injects more money into the economy. This can increase the overall demand for goods and services, leading to an increase in prices, which is known as inflation. Additionally, increased government spending can also put pressure on the supply side of the economy, causing businesses to increase prices to cope with higher costs.
It's important to consider that the impact of government spending on employment, inflation, and other economic factors can vary depending on the specific circumstances, economic conditions, and other policies in place.