Question

An increase in government spending with no change in taxes leads to a

Answer 1

Answer:

higher interest rate

Explanation:

Government spending refers to money spent by the government on the purchase of goods and provision of services including education, healthcare, public consumption, and public investment, etc.

Government spending can be financed by government borrowing or taxes. So, an increase in government spending with no change in taxes leads to a higher interest rate.

The total interest on an amount depends on the principal sum, the interest rate, and the time for which the amount has been lent, deposited, or borrowed.