Assuming that other things remain the same, what effect does a government budget deficit have on saving?
A) It increases both private and national saving.
B) It increases public saving but reduces national saving.
C) It reduces both public and national saving.
D) It reduces private saving but increases national saving.

Question

Quizplus · Accepted Answer

A government budget deficit means that the government is spending more than it is taking in through revenues, and this can have a negative effect on saving. It reduces public saving because the government is not able to save any money in this situation, and it also reduces national saving because overall, the country is spending more than it is producing. This can lead to higher interest rates and lower investment, which in turn can lead to lower private saving as well.

Assuming That Other Things Remain the Same, What Effect Does