Asked by Flaviano Maurice on Jun 04, 2024
Verified
A larger budget deficit
A) raises the interest rate and investment.
B) reduces the interest rate and investment.
C) raises the interest rate and reduces investment.
D) reduces the interest rate and raises investment.
Budget Deficit
The financial situation where a government's expenditures exceed its revenues over a specified period, leading to borrowing or debt accumulation.
Investment
The allocation of resources, such as capital, time, or assets, to a project or asset with the expectation of generating future profits.
- Investigate the influence of shifts in government budget situations on interest rates and investment activities.
Verified Answer
ZK
Zybrea KnightJun 10, 2024
Final Answer :
C
Explanation :
A larger budget deficit typically leads to higher interest rates because the government needs to borrow more from the private sector, which in turn reduces the amount of funds available for private investment. This scenario increases the cost of borrowing (interest rates) and consequently reduces investment.
Learning Objectives
- Investigate the influence of shifts in government budget situations on interest rates and investment activities.
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