Persistent Current Account Deficits Make Sense If

question 35

Multiple Choice

Persistent current account deficits make sense if

• A) the capital account surplus is reduced.
• B) government interest rates go down accordingly.
• C) the associated foreign borrowing is used to finance increased productive capacity.
• D) personal income taxes are reduced.
• E) the government budgetary debt is not growing.

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Definitions:

Indifference Curves

A graph showing different bundles of goods between which a consumer is indifferent, illustrating preferences and trade-offs.

Budget Constraint

The constraint on the collection of goods or services a consumer is able to purchase, determined by their income and the cost of those goods or services.

Utility

A measure of satisfaction or happiness that consumers derive from consuming goods and services.

Indifference Curves

Graphical representations used in microeconomics to show combinations of two goods that give an individual equal satisfaction and utility.