An increase in government borrowing has no effect on the willingness of citizens to save or on the demand for credit.Increased borrowing to cover deficits will therefore:

Question

Quizplus · Accepted Answer

Increased government borrowing typically increases the demand for credit in the economy. When the government borrows more, it competes with the private sector for available funds, leading to higher interest rates as lenders can demand more due to the increased demand for credit.

An Increase in Government Borrowing Has No Effect on the Willingness