When a Country Runs a Current Account Deficit to Finance

question 10

Multiple Choice

When a country runs a current account deficit to finance an increase in domestic investment expenditures, it causes

• A)consumption smoothing over time.
• B)the real interest rate to increase.
• C)a government deficit to occur.
• D)taxes to rise.
• E)an increase in capital stock and future productive capacity.

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Definitions:

Dissolution

The process of legally dissolving or ending an entity, such as a corporation or partnership.

Debenture

A type of debt instrument that is not secured by physical assets or collateral but is backed by the general creditworthiness and reputation of the issuer.

Creditor/Debtor

A relationship where one party (the creditor) lends money or extends credit, and the other party (the debtor) owes the money.

Articles of Incorporation

Legal documents filed with a governmental body to legally document the creation of a corporation.