During a recession,governments tend to run budget deficits.What effect will this have on the savings supply curve?
A)It will result in a movement along the curve.
B)It will shift the curve to the right.
C)It will shift the curve to the left.
D)There will be no change in the curve.

Question

Quizplus · Accepted Answer

Running a budget deficit means that the government is spending more than it is receiving in revenue. This can lead to an increase in the demand for loanable funds and result in the crowding out of private investment. As a result, the savings supply curve is likely to shift to the left, indicating a lower quantity of savings supplied at each interest rate.

During a Recession,governments Tend to Run Budget Deficits