When the government runs a deficit, the interest rate tends to:
A)rise.
B)fall.
C)remain unchanged.
D)rise or fall, depending on how the deficit is financed.

Name: When the government runs a deficit, the interest rate tends to: A)rise. B)fall. C)remain unchanged. D)rise or fall, depending on how the deficit is financed.
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Question

Quizplus · Accepted Answer

When the government runs a deficit, it typically borrows money, increasing the demand for loanable funds, which tends to push interest rates up.

When the Government Runs a Deficit, the Interest Rate Tends