The effect of an increase in the government budget deficit on the equilibrium level of GDP is essentially the same as a(n)
A)decrease in saving.
B)increase in saving.
C)decrease in consumption.
D)decrease in investment.

Question

Quizplus · Accepted Answer

An increase in the government budget deficit typically leads to higher interest rates, which can crowd out private investment, similar to the effect of a decrease in saving.

The Effect of an Increase in the Government Budget Deficit