Question

Suppose Argentina is not going to be able to make its payments to its creditors and has to turn to the International Monetary Fund for a loan.
The IMF requires Argentina to reduce government spending by cutting salaries to government workers and reducing pension payments.
This is an example of which of the following?
a. bilateral investing
b. depression
c. economic growth
d. austerity

Answer 1

The IMF requires Argentina to reduce government spending by cutting salaries to government workers and reducing pension payments. This is an example of Austerity.

• In order to control the rising public debt, a government may enact strict economic policies known as austerity, which are characterized by increased frugal living.
• There are three main categories of austerity measures: raising taxes to finance spending, raising taxes while eliminating non-essential government services, and lowering taxes while reducing spending.
• Austerity is divisive, and the effects on a country's overall well-being can be worse than they would have been otherwise.
• During periods of economic uncertainty, austerity measures were implemented in the United States, Spain, and Greece.
• Governments experience financial instability when their debt exceeds their income, leading to significant budget deficits. Government spending increases typically result in higher debt levels.

Learn more about Austerity, here

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