A temporary decrease 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 decrease in government purchases reduces the demand for loanable funds, leading to a lower domestic real interest rate. This encourages more saving, thus increasing net desired saving.

A Temporary Decrease in Government Purchases Would ________ the Domestic