Suppose a country has a smaller increase in debt in 2012 than it had in 2011.Then other things the same,

Question

Quizplus · Accepted Answer

If a country has a smaller increase in debt, then it is borrowing less, which means it is supplying less loanable funds. When the supply of loanable funds decreases, the interest rate falls (assuming demand remains constant). This is because borrowers are now competing for a smaller pool of funds, which reduces the cost of borrowing.

Suppose a Country Has a Smaller Increase in Debt in 2012