When the government runs a budget deficit,
A)interest rates are lower than they would be if the budget were balanced.
B)national saving is higher than it would be if the budget were balanced.
C)investment is lower than it would be if the budget were balanced.
D)All of the above are correct.

Question

Quizplus · Accepted Answer

When the government runs a budget deficit, it borrows from the financial markets, which can lead to higher interest rates. This crowding out effect reduces the funds available for private investment, making investment lower than it would be if the budget were balanced.

When the Government Runs a Budget Deficit