Bolivia had a smaller budget deficit in 2003 than in 2002.Other things the same,we would expect this reduction in the budget deficit to have
A)increased both interest rates and investment.
B)increased interest rates and decreased investment.
C)decreased interest rates and increased investment.
D)decreased both interest rates and investment.

Question

Quizplus · Accepted Answer

A reduction in the budget deficit generally leads to a decrease in the supply of government bonds, which can reduce interest rates. Additionally, a reduction in the budget deficit may enhance investor confidence in the government's fiscal situation, which can lead to greater investment. Therefore, we would expect a reduction in the budget deficit to lead to a decrease in interest rates and an increase in investment.

Bolivia Had a Smaller Budget Deficit in 2003 Than in 2002.Other