As a result of an increased deficit associated with discretionary fiscal policy,
A)both the interest rate and real output fall
B)both the interest rate and nominal output rise
C)the interest rate falls and real output rises
D)the interest rate rises and real output falls
E)nominal output rises,real output falls,and the interest rate rises

Question

Quizplus · Accepted Answer

An increased deficit from discretionary fiscal policy typically leads to higher government borrowing, which can increase interest rates and stimulate nominal output through increased government spending.

As a Result of an Increased Deficit Associated with Discretionary