An Increase in the Budget Deficit Makes Domestic Interest Rates

question 4

Multiple Choice

An increase in the budget deficit makes domestic interest rates

• A)rise because the supply of loanable funds shifts left.
• B)fall because the supply of loanable funds shifts left.
• C)rise because the demand for loanable funds shifts right.
• D)fall because the demand for loanable funds shifts right.

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Definitions:

Long-Term Investments

Investments held by a company not intended for sale in the short term and expected to deliver value over an extended period.

Interest Receipt

Interest Receipts are amounts received by an individual or a company as interest from investments, loans given, or savings.

Market Rate

The prevailing interest rate available in the market for loans or the return on investment securities.

Preferred Shares

Preferred shares are a type of equity security that typically provide dividends and asset liquidation preference over common shares but usually do not carry voting rights.