How does an increase in government expenditure paid for by borrowing influence aggregate demand?

Question

Answer

Borrowing lowers the real interest rate and increases investment.

Answer

Borrowing raises the real interest rate, increases the budget debt but does not change investment.

Answer

Borrowing raises the real interest rate, decreases investment, and offsets the increase in government expenditure.

Answer

Borrowing raises the real interest rate, decreases saving, and increases consumption expenditure.

Answer

Government borrowing does not change the real interest rate, so aggregate demand increases.

Crowdly