Assume the U.S. government was to decide to decrease the budget deficit. Holding all else constant, this will cause ______ to decrease.

A) interest rates
B) government borrowing
C) unemployment
D) interest rates and government borrowing
E) None of the options are correct.

Budget Deficit

A financial situation where an entity’s expenditures exceed its revenues over a specified period, leading to a shortfall that must be financed through borrowing.

Government Borrowing

The process by which a government raises funds to finance its operations and projects by issuing debt instruments, such as bonds.

Interest Rates

The cost of borrowing money or the return for investing, expressed as a percentage of the principal.