The deficit can drive up interest rates because now the government is competing with the private sector for money. This is an increase in demand, which causes prices (in this case represented by interest rates to increase). Likewise, if the government is using money typically available for private investment, then private investment will decrease. Every year a deficit is run adds to our national debt. The U.S. government must pay interest on this debt (currently about 15% of the entire budget), which means this money can not be used for other government programs.

Approximately 50% of the budgetary dollor goes to payments to individuals.

This option deals with too much government and decreasing spending for "unaffordable luxuries" such as the space station.

Strong economic growth can contribute to all these things including inflation. If wages increase, then the demand for products will increase, which in turn will cause prices to increase. This is inflation.

By increasing taxes, the government is taking money out of your pocket so you spend less (demand less products) and that should start the process of decreasing inflation.

(A) decrease taxes will increase inflation and is incorrect.

(B) increase government spending will increase inflation by providing more jobs and wages and is incorrect.

(C) increase interest rates will decrease inflation BUT this is done by the Federal Reserve Board and NOT the president and Congress. Therefore, it is incorrect.

(E) increase the reserve requirement will provide for less money to lend, which will limit spending, decrease inflation. It is also done by the FED. It is also incorrect.

In a flat tax, everyone (no matter how much they earn) pays the same percentage of their income. Therefore, unequals are not being treated unequally (the definition for vertical equity).

(A) Collectability is incorrect. It still will be easy to collect and theoretically can collect enough revenue.

(B) Buoyancy is incorrect. Taxes will rise as income rises.

(C) Visibility is incorrect. The tax is still visible, but no more so than the old income tax system.

(E) Horizontal Equity is incorrect. This is not a problem because those making the same amount of money will be paying the same amount of taxes (equals treated equally--definition).