Other things equal, ________ interest rates increase the government deficit because of ________ government interest payments.
A) high; lower
B) high; higher
C) low; lower
D) low; higher

Question

Quizplus · Accepted Answer

When interest rates are high, it becomes more expensive for the government to borrow money, leading to increased government interest payments and a larger deficit. Therefore, higher interest rates lead to higher government deficits.

Other Things Equal, ________ Interest Rates Increase the Government Deficit