Question

For each of the following, indicate which type of government spending would justify a budget deficit and which would not.

a) Infrastructure development
b) Social welfare programs
c) Defense and military spending
d) Tax cuts

Answer 1

Infrastructure development justifies a budget deficit, social welfare programs and defense and military spending may justify a budget deficit depending on the circumstances, and tax cuts may or may not justify a budget deficit depending on the specific context. thus, the correct option is D).

Step-by-step explanation:

For each type of government spending, we need to determine if it would justify a budget deficit or not:

1. Infrastructure development: Increased spending on infrastructure development, such as airports and air traffic control, can lead to increased productivity and economic growth. Therefore, a budget deficit would be justified.
2. Social welfare programs: Increased spending on social welfare programs, such as Medicare, may not directly increase productivity. Therefore, a budget deficit would not be justified.
3. Defense and military spending: Increased spending on defense and military can be controversial but is typically considered essential for national security. Therefore, a budget deficit may be justified.
4. Tax cuts: Tax cuts reduce government revenue, which can lead to a budget deficit. However, the decision to implement tax cuts depends on various factors, such as the state of the economy and government's fiscal policy goals.