Figure 16-3

-If budget deficits shift the money demand curve as is illustrated in Figure 16-3, which component of total expenditures will be affected the most?
A)consumption spending
B)government spending
C)private investment spending
D)net exports

Question

Figure 16-3
 
-If budget deficits shift the money demand curve as is illustrated in Figure 16-3, which component of total expenditures will be affected the most?
A)consumption spending 
B)government spending 
C)private investment spending 
D)net exports

Quizplus · Accepted Answer

Budget deficits can lead to higher interest rates, which primarily affect private investment spending by making borrowing more expensive.

Figure 16-3 -If Budget Deficits Shift the Money Demand Curve as Is