Suppose total government spending is increased permanently by ten perc

Suppose total government spending is increased permanently by ten percent, with no change in tax rates. In the long run, the resulting deficit will disappear, ________.

A) only if government spending is brought back down to the original level
B) if economic growth raises tax revenue by ten percent
C) if the government debt is sold to foreigners
D) unless the money is spent entirely on government consumption

ANSWER

B