Macroeconomics

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Government Deficit Reduction and Consequences

MACRO-B1PVE2

Following a reduction in a government deficit, which of the following occurs?

A

A reduced rate of interest and increased availability of funds for private investment.

B

A decrease in the supply of funds for private investment and a higher rate of interest.

C

Lower interest rates will crowd out private investment.

D

An increase in the demand for loanable funds with an increase in quantity of funds loaned.