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.

---

Definitions:

Wine Drinkers

Individuals who consume wine, either casually or as enthusiasts, forming a consumer base in the beverage market.

Rational Investor

An individual who makes investment decisions based on logic and available information to maximize returns and minimize risk.

Bond

A fixed income instrument representing a loan made by an investor to a borrower, typically corporate or governmental, which pays back with interest.

Interest Rate

The percentage of an amount of money charged by a lender to a borrower for the use of assets over a specific period.