Which of the following is the most likely consequence of a government running a persistent structural budget deficit?
A continuous increase in the national debt as a proportion of GDP, unless the rate of nominal economic growth exceeds the rate of debt accumulation
An automatic contraction in the cyclical budget deficit to ensure that the overall public sector net cash requirement remains balanced
An immediate upgrade to the sovereign credit rating, as international lenders favor economies with large public sector borrowing requirements
A fall in long-term bond yields, because persistent borrowing increases the market demand for government securities
44 exam-style questions on Edexcel A A Level Economics 4.5.3 Public sector finances. Each one has a worked solution and a mark scheme showing where the marks go.