An increase in the government spending that is financed though borrowing _____ the interest rate, which can lead to ______ in private investment.

Question

Quizplus · Accepted Answer

An increase in government spending financed through borrowing typically raises the demand for loanable funds, which increases the interest rate. This higher interest rate can crowd out private investment, leading to a decrease in it.

An Increase in the Government Spending That Is Financed Though