An increase in the budget deficit
A)reduces net capital outflow and domestic investment.
B)reduces net capital outflow and raises domestic investment.
C)raises net capital outflow and domestic investment
D)raises net capital outflow and reduces domestic investment.

Question

Quizplus · Accepted Answer

An increase in the budget deficit typically leads to higher interest rates, which reduces net capital outflow and domestic investment as borrowing becomes more expensive.

An Increase in the Budget Deficit