In the short-run framework, budget deficits should:
a. never be run since they slow economic growth over the long run.
b. never be run since they crowd out investment in the short run.
c. be run on a temporary basis whenever the economy is below potential output.
d. be run on a permanent basis since they can always be financed by printing money.
The correct answer is "C".
Budget deficits should only be run on a temporary basis. Budget deficits may need to employed in bad economic times, but to be fiscally responsible they should only be temporary.
Your answer options "A" and "B" say they should never be run. That is incorrect as there are times when the economy needs to be spurred on.
Answer D says they should be permanent. That is incorrect also, as this is fiscally irresponsible.
Correct answer is "C" — on a temporary basis.
what is your answer?