When There Are Credit Market Imperfections, an Increase in Government

question 10

Multiple Choice

When there are credit market imperfections, an increase in government debt may be advantageous because it

• A) discourages credit-constrained consumers from borrowing too much.
• B) increases the welfare of credit-constrained consumers.
• C) eliminates the problems that cause credit market imperfections.
• D) encourages more private saving.
• E) borrows at higher interest rates than consumers.

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