In the Two-Period SOE Model, If the Real Interest Rate

question 19

Multiple Choice

In the two-period SOE model, if the real interest rate decreases and the current account is initially in deficit, then

• A) the current account surplus stays the same.
• B) the current account surplus falls.
• C) the current account deficit falls.
• D) the current account surplus rises.
• E) the current account deficit stays the same.

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Definitions:

Transfer Payments

Payments made by the government to individuals or groups without expecting a good or service in return, often aimed at redistributing income, such as social security benefits and subsidies.

Government Purchases

Expenditures by government agencies on goods and services that directly satisfy public consumption or investment in public infrastructure.

Transfer Payments

Payments made by governments to individuals without any expectation of services or goods in return, often in the form of welfare or subsidies.

U.S. Output

The total economic production of goods and services by the United States.