The conventional view among economists is that persistent budget deficits lead to ________ real interest rates and ________ private investment.

Question

Quizplus · Accepted Answer

The conventional view among economists is that persistent budget deficits lead to higher real interest rates as governments borrow more, which leads to decreased availability of funds and increased competition for those funds, driving up interest rates. Higher real interest rates then lead to crowding out of private investment, as it becomes more expensive for individuals and businesses to borrow money for investment.

The Conventional View Among Economists Is That Persistent Budget Deficits