Refer to Figure 12.5 for the Following Question

question 41

Multiple Choice

Refer to Figure 12.5 for the following question.
Figure 12.5

-Refer to Figure 12.5. In this figure, suppose the economy in Year 1 is at point A and expected in Year 2 to be at point B. Which of the following policies could the Reserve Bank of Australia use to move the economy to point C?

• A)decrease income taxes
• B)increase government spending
• C)buy financial securities
• D)sell financial securities

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Definitions:

Net Capital Outflow

The net balance resulting from domestic residents buying foreign assets and foreigners buying domestic assets.

Real Interest Rate

The interest rate adjusted for inflation, indicating the real profit of an investment or the real cost of borrowing.

Government Budget Deficit

A financial situation that occurs when a government's expenditures exceed its revenues in a given fiscal period.

National Saving

National saving, also known as domestic saving, is the sum of private and public saving, representing the part of national income that is not consumed or spent by the government.