Question : What is the purpose of a debt ceiling?
Option 1: To limit the amount of debt the government can take on
Option 2: To encourage economic growth
Option 3: To decrease taxes
Option 4: To decrease government spending
Correct Answer: To limit the amount of debt the government can take on
Solution : The correct answer is (a). To limit the amount of debt the government can take on.
A debt ceiling is a legislative mechanism that sets a maximum limit on the amount of debt that the government can legally incur. It serves as a restriction or a cap on the total amount of outstanding debt that the government can accumulate.
The purpose of a debt ceiling is to provide a measure of fiscal discipline and oversight by placing a limit on the government's borrowing capacity. It is designed to prevent excessive debt accumulation and to promote responsible fiscal management. When the government approaches or reaches the debt ceiling, it typically triggers a need for lawmakers to take action, such as raising the ceiling or implementing measures to reduce spending and address the debt situation.
