To reduce a national deficit, governments can increase taxation to generate more revenue. This
measure, combined with controlled spending, helps reduce the shortfall between revenues and
expenditures.
Why Other Options are Incorrect:
B . Increase government spending: This would increase the deficit further unless matched by revenue
increases.
C . Decrease taxation: This would reduce revenue and worsen the deficit.
D . Increase interest rates: This impacts monetary policy and borrowing costs but does not directly
reduce a fiscal deficit.
Reference:
CSC Volume 1, Chapter 5, "Fiscal Policy – Addressing Budget Deficits" discusses how governments
use taxation to manage deficits.
