Deficit spending requires a government to take on debt.
Further explanation:
Deficit spending is a measure of how much spending of government exceeds its revenue over a time period. Deficit spending or a budget deficit requires the government to finance excess spending over revenue and this is financed by the government debts. The government needs to take on the debts either from domestic international sources to pay for those excess spending.
Further explanation for correct and incorrect
lay off workers: This option is incorrect.
The government, in order to fund the deficit spending balance, does not lay off workers as the government workers have permanent jobs that cannot be taken in any circumstance. In the phase of the budget deficit, the government needs money and not need to save money by laying off workers.
cut taxes: This option is incorrect.
When the government faces a budget deficit already, it does not cut taxes which will result in lower revenue. Deficit spending arises when the government collects less revenue than spending, thus tax rates are not lowered in the phase of deficit spending.
take on debt: This option is correct.
In the phase of deficit spending, the government needs money in order to fund excess spending. And, that can be possible when the government takes on the debt from domestic or international sources. Thus, government debts rise in times of deficit spending.
hire more workers: This option is incorrect.
In the phase of deficit spending, the government already has a huge level of expenditure to finance. At that time, the government would not raise its expenditure more by hiring more workers. Thus, hiring more workers would not be seen in deficit spending.
Therefore, deficit spending requires the government to take on debt.
Learn more:
1.Learn more about GDP and taxes.
2.Learn more about economic pie.
3.Learn more about state income tax.
Answer details:
Grade: Senior school
Subject: Economics
Chapter: Budget deficit
Keywords: what, does, deficit spending, require, a government to do, lay off workers, cut taxes, take on debt, hire more workers, deficit spending is a measure of how much spending of government exceeds its revenue, take on the debts either from domestic international sources.
