A temporary increase in government purchases would ________ the domestic real interest rate and ________ net desired saving (desired saving less desired investment)in the economy.
A)lower; increase
B)lower; decrease
C)raise; increase
D)raise; decrease

Question

Quizplus · Accepted Answer

A temporary increase in government purchases raises the domestic real interest rate due to increased demand for funds, leading to a decrease in net desired saving as savings are diverted to finance the government spending.

A Temporary Increase in Government Purchases Would ________ the Domestic