If a Budget Deficit Increases Interest Rates, It Is Possible

question 158

Multiple Choice

If a budget deficit increases interest rates, it is possible that investment will

• A)fall, leading to a larger capital stock.
• B)fall, so that there is a smaller capital stock.
• C)rise, because investment is directly related to interest rates.
• D)rise, because investment is more attractive when interest rates are higher.

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