In 2009 Greece's budget deficit rose and people became worried about the ability of the Greek government to continue to make payments on its debt.Which of these events raise a country's interest rates?
A)an increase in the budget deficit and increased concerns about the ability of the government to pay back its debt
B)an increase in the budget deficit,but not increased concerns about the ability of the government to pay back its debt
C)increased concerns about the ability of the government to pay back its debt,but not an increase in the budget deficit
D)neither an increase in the budget deficit nor increased concerns about the ability of the government to pay back its debt

Question

Quizplus · Accepted Answer

Both an increase in the budget deficit and concerns about the ability of the government to pay back its debt are factors that can lead to higher interest rates. Lenders require higher interest rates as compensation for taking on the higher risk of lending to a country with a larger budget deficit and uncertain ability to pay back its debt.

In 2009 Greece's Budget Deficit Rose and People Became Worried