Question

The mayor of your hometown has said she will request that the federal government extend a nearby interstate highway so that it passes by the city, stimulating economic growth. However, the federal government is reluctant to do this because it is currently running a budget deficit. If the interstate was extended at a cost of $35 million, what would be the impact of this outlay on the federal government’s budget?

Answer 1

Answer:

• an increase in discretionary spending and, if no other changes are made, an increase in the government's deficit

• an increase in the government's debt

Explanation:

A budget deficit occurs when the federal government has more spending than it recites. That is, the government has many debts and can not raise enough money to pay these debts and maintain a good standard of living for citizens. The consequences of large budget deficits cause great damage to the country, especially for people with lower incomes. For this reason, it is necessary that in a deficit situation, the government reduced spending.

This is not the case with the government shown in the question above. Even in a budget deficit situation, the government wants to extend an interstate highway that will cost $ 35 million. The result of this will be:

• an increase in discretionary spending and, if no other changes are made, an increase in the government's deficit

• an increase in the government's debt

Discretionary expenses are those expenses for which the government has some degree of decision.