If the government continues to borrow year after year, it leads to the _____.
Show answer & explanation
Correct answer: A
Explanation
If the government continues to borrow year after year, it leads to debt accumulation.
Key Points:
- Debt accumulation: When the government continuously borrows to meet its expenses, the burden of previous debt and the interest on it increases. This is called 'debt accumulation' or 'debt stock'.
- Fiscal deficit: The difference between the government's total income and total expenditure is the main reason for borrowing.