PPSCFPSCNTSPakistan govt jobs
- Subject
- Stockseconomics-mcqs › stocks
- Published
- 30 May 2019
- Last updated
- 28 May 2026
What is the effect of a larger budget deficit on the real interest rate and the demand for loanable funds used for investment?
Multiple choice question for Stocks. Select an option, then review the explanation below.
Explanation
An increase in the budget deficit tends to push up the real interest rate because the government competes for available loanable funds. This higher interest rate discourages some investment, leading to a decrease in the quantity of loanable funds demanded for investment.
More Stocks MCQs
Practice related questions from the same subject.
- 1.What is the effect of an increase in the budget surplus on the market for loanable funds?
- 2.What happens to real interest rates and investment if Pakistani citizens become less future-oriented and reduce their savings at every real interest rate?
- 3.What effect does a rise in the budget deficit have on public savings?
- 4.Which combination of government policies is most effective in promoting economic growth?
- 5.What does investment primarily refer to?