Assume that the government finances its spending by borrowing from the public. If the government increases deficit spending, the price of previously issued bonds and the real interest rate will change in which of the following ways?
Price of Bonds Real Interest Rate
a. decrease, decrease
b. decrease, increase
c. increase, decrease
d. increase, no change
e. increase, increase
+4
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Home » Business » Assume that the government finances its spending by borrowing from the public. If the government increases deficit spending, the price of previously issued bonds and the real interest rate will change in which of the following ways?