When the government runs a budget deficit,

a. national saving is higher than it would be if the budget were balanced.
b. investment is lower than it would be if the budget were balanced.
c. interest rates are lower than they would be if the budget were balanced.
d. All of the above are correct.
e. None of the above is correct.

Solutions

Expert Solution

Solution: investment is lower than it would be if the budget were balanced.

Explanation: When the government would be running a balanced budget to running a budget deficit, it causes a fall in national saving, the interest rate increases, and the long-run growth rate of an economy is likely to decrease. When the government runs a budget deficit, interest rate increases and lowers the investment than it would be if the budget were balanced

Rahul Sunny answered 1 year ago

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