Mortgage prices would normally be expected to ____ when the budget deficit ____, holding other factors constant.

Question

Quizplus · Accepted Answer

When the budget deficit increases, it leads to an increase in government borrowing, which increases demand for loanable funds. This increase in demand for loanable funds causes interest rates to rise, including mortgage rates. Therefore, mortgage prices would be expected to increase when the budget deficit decreases.

Mortgage Prices Would Normally Be Expected to ____ When the Budget