Figure 32-3

-If budget deficits shift the money demand curve as is illustrated in Figure 32-3, which component of total expenditures will be affected the most?
A)Consumption spending
B)Government spending
C)Private investment spending
D)Net exports

Question

Figure 32-3
​ 
-If budget deficits shift the money demand curve as is illustrated in Figure 32-3, which component of total expenditures will be affected the most?
A)Consumption spending 
B)Government spending 
C)Private investment spending 
D)Net exports

Quizplus · Accepted Answer

Private investment spending is most affected by shifts in the money demand curve resulting from budget deficits. This is because higher interest rates, which can result from increased money demand due to budget deficits, typically reduce investment spending by making borrowing more expensive for businesses.

Figure 32-3 ​

Figure 32-3