This exercise should lead to lively discussion as to the harmful effects of a government budget deficit. When assigning the exercise be sure to have students explore some of the more indirect effects of a government budget deficit as well as the more obvious direct effects such as interest costs.

Split the class into pairs of students. Each pair then uses the information in the chapter to write five answers (one correct and four incorrect choices) to the following multiple-choice question:

A government budget deficit may be harmful because:
a.
b.
c.
d.
e.

The instructor then collects the answers and presents several for the entire class to evaluate.