Question

How does the federal debt impact the economy?

Answer 1

The federal debt impacts the economy as it can slow growth by decreasing consumer confidence.

Answer: Option B

Explanation:

Every country these days is caught up in a situation where it has to take federal debt and this often has an adverse impact on the economy of the country. One of the setbacks that the economy faces is that the rate of growth of the economy slows down as consumer confidence decreases to a great extent.

Even the interest rates, as well as tax rates, are hiked which result in it reduction in the rate of investment and an increase in inflation as the purchasing power of the consumers as well as the access to money in terms of loans is reduced, hence, adversely affecting the consumer confidence.