A federal government budget deficit Group of answer choices may lead to higher interest rates because of increased government borrowing. will not have an impact on interest rates because the government securities are considered risk-free. may lead to lower interest rates because investors are reluctant to buy more government securities. may lead to lower interest rates because the government revenue is lower than expenditure.
Added by Nerea S.
Step 1
A budget deficit occurs when the government's expenditures exceed its revenues, leading to the need for borrowing to cover the shortfall. Show more…
Show all steps
Your feedback will help us improve your experience
Arun Bana and 98 other Microeconomics educators are ready to help you.
Ask a new question
Labs
Want to see this concept in action?
Explore this concept interactively to see how it behaves as you change inputs.
Key Concepts
Recommended Videos
Explain what effect a large federal deficit should have on interest rates.
Arun B.
Multiple Choice Question.... Which statement is a major consequence of high government budget deficits? A) All else held constant, high budget deficits financed by borrowing will lead to lower interest rates. B) If the government finances the deficit by borrowing money, it can crowd out business investment. C) Budget deficits cause unemployment as firms relocate to countries with balanced budgets. D) Printing money to finance the deficit can lead to a significantly deflationary environment.
Andrew D.
Rashmi S.
Recommended Textbooks
Principles of Economics
Principles of Microeconomics for AP® Courses
Economics
Transcript
Watch the video solution with this free unlock.
EMAIL
PASSWORD