In an Open Economy, a Decrease in the Government's Budget

question 31

Multiple Choice

In an open economy, a decrease in the government's budget deficit will ________ the domestic real interest rate and ________ the level of capital investment in the country, holding other factors constant.

• A)increase; increase
• B)increase; decrease
• C)decrease; decrease
• D)decrease; increase

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Definitions:

Balance Sheet

A report that lists a business's assets, obligations, and the equity of its shareholders on a specific date.

Property, Plant, and Equipment

The tangible long-lived assets used in the operations of a business, including land, buildings, machinery, and equipment.

Current Assets

Assets that a company expects to convert into cash or use up within one year or during its normal operating cycle, whichever is longer.

Income Statement

A financial statement that shows a company's revenues, expenses, and profits or losses over a specific period.