All else being constant, an increase in the government share of GDP would result in
A)an increase in net exports.
B)a higher dollar exchange rate.
C)the interest rate remaining constant.
D)a lower interest rate.
E)a higher interest rate.

Question

Quizplus · Accepted Answer

An increase in government share of GDP means higher government spending, which will increase demand for loanable funds and thus increase interest rates.

All Else Being Constant, an Increase in the Government Share