the economy of burginville has been running budget deficits which it paid for by borrowing. what is the…

the economy of burginville has been running budget deficits which it paid for by borrowing. what is the likely impact of government borrowing on spending on capital goods and economic growth in burginville? choose 1 answer: a increase in spending on capital goods; no effect on economic growth b a decrease in spending on capital goods; no effect on economic growth c no effect on spending on capital goods or economic growth d increase in spending on capital goods; an increase in economic growth e a decrease in spending on capital goods; a decrease in economic growth

the economy of burginville has been running budget deficits which it paid for by borrowing. what is the likely impact of government borrowing on spending on capital goods and economic growth in burginville? choose 1 answer: a increase in spending on capital goods; no effect on economic growth b a decrease in spending on capital goods; no effect on economic growth c no effect on spending on capital goods or economic growth d increase in spending on capital goods; an increase in economic growth e a decrease in spending on capital goods; a decrease in economic growth

Answer

Brief Explanations:

When the government borrows to cover budget - deficits, it competes for available funds in the financial market. This increases interest rates. Higher interest rates make borrowing more expensive for businesses. As a result, businesses are likely to cut back on investment in capital goods. Reduced investment in capital goods can lead to a decrease in economic growth as capital goods are important for increasing productivity and expanding production capacity.

Answer:

E. A decrease in spending on capital goods; a decrease in economic growth