Multiple Choice
With regard to the economy, the term 'negative inflation' is synonymous with which of the following?
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1. Introduction to Macroeconomics
Introduction to Economics
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In the context of macroeconomics, what does a declining national debt most likely indicate?
A
The central bank is increasing interest rates.
B
The country's GDP is decreasing.
C
Inflation is rising rapidly.
D
The government is running budget surpluses.
Verified step by step guidance1
Understand that national debt represents the total amount of money the government owes to creditors, accumulated over time from budget deficits.
Recognize that a declining national debt means the government is reducing its total outstanding debt, which typically happens when it spends less than it earns.
Recall that when a government runs a budget surplus, its revenues exceed its expenditures, allowing it to pay down existing debt.
Analyze the other options: increasing interest rates, decreasing GDP, or rising inflation do not directly cause a decline in national debt; they affect the economy differently.
Conclude that a declining national debt most likely indicates the government is running budget surpluses, as this is the direct mechanism for reducing debt.
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