What would an increase in the budget deficit most likely do to investment spending?
A)It would make investment spending fall.
B)It would make investment spending rise.
C)It would not affect investment spending.
D)It may increase, decrease, or not affect investment spending.

Question

Quizplus · Accepted Answer

An increase in the budget deficit generally leads to higher interest rates, which in turn can discourage investment spending. This is because higher interest rates increase the cost of borrowing, making it more expensive for firms to fund their investment projects. As a result, investment spending is likely to fall.

What Would an Increase in the Budget Deficit Most Likely