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

Question

Quizplus · Accepted Answer

When interest rates are high, the cost of borrowing for the government increases, leading to higher government interest payments. This increases the government deficit, as more money is being spent on interest payments and less is available for other government spending.

Other Things Equal, High Interest Rates ________ the Government Deficit