In a closed economy,what will an increase in government spending without an equivalent increase in tax revenue lead to?

Question

Quizplus · Accepted Answer

An increase in government spending without an equivalent increase in tax revenue will lead to a decrease in public saving (since government spending is part of public savings) and a decrease in investment. This is because there will be a reduction in funds available for private investment as government borrowing will increase, and this will lead to an increase in interest rates, which in turn will make borrowing for private investment more expensive.

In a Closed Economy,what Will an Increase in Government Spending