What Does Macroeconomic Theory Predict as the Main Economic Effect

question 98

Multiple Choice

What does macroeconomic theory predict as the main economic effect of a reduction in the budget deficit?

• A)lower real interest rates 
• B)a drop in the exchange rate 
• C)an increase in net exports 
• D)All of the above are correct.

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Definitions:

Internal Validity

The extent to which a study can demonstrate that a causal relationship exists between variables, free from external influences.

Construct Validity

The extent to which a test measures what it claims to be measuring, in the context of psychological testing and research.

Mundane Realism

Refers to whether the setting of an experiment physically resembles the real world.

Reactance

An unpleasant emotional response that people often experience when someone is trying to restrict their freedom.