Asked by Latoya Alexander on Jun 18, 2024
Verified
Large budget deficits tend to
A) raise interest rates.
B) lower interest rates.
C) have no effect on interest rates.
Budget Deficits
occur when a government's expenditures exceed its revenues within a specific fiscal period, creating a shortfall that requires borrowing to finance.
Interest Rates
The expense associated with taking out a loan or the benefit received from depositing funds, typically described as a yearly percentage of the total sum.
- Investigate the linkage among fiscal strategy, interest rate levels, and the deficit in the federal budget.
Verified Answer
HF
HASNAIN FATEH MUHAMMEDJun 21, 2024
Final Answer :
A
Explanation :
Large budget deficits tend to increase the supply of government bonds on the market, which in turn leads to a higher demand for borrowing and higher interest rates to attract investors.
Learning Objectives
- Investigate the linkage among fiscal strategy, interest rate levels, and the deficit in the federal budget.
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