Which of the following is true about an increase in the U.S. government's budget deficit?
A)It will lead to global crowding out if U.S. interest rates fall below the level of interest rates in other countries.
B)It will cause outflows of foreign funds from the United States as foreign investors move their funds to other countries.
C)It will cause an inward shift in the aggregate demand for loanable funds curve.
D)None of these are correct.

Question

Quizplus · Accepted Answer

An increase in the U.S. government's budget deficit is likely to lead to higher interest rates domestically due to increased demand for loanable funds, not necessarily to global crowding out, outflows of foreign funds, or an inward shift in the aggregate demand for loanable funds curve.

Which of the Following Is True About an Increase in the U.S