Everything Else Held Constant,when Financial Frictions Increase,the Real Cost of Borrowing

question 99

Multiple Choice

Everything else held constant,when financial frictions increase,the real cost of borrowing ________ so that planned investment spending ________ at any given inflation rate.

• A)increases;falls
• B)decreases;falls
• C)decreases;rises
• D)increases;rises

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Definitions:

Congressional Budget Office

A federal agency within the legislative branch of the United States government that provides budget and economic information to Congress.

Agricultural Subsidies

are governmental financial support paid to farmers and agribusinesses to supplement their income, manage the supply of agricultural commodities, and influence the cost and supply of such commodities.

Fiscal Policy

Government policies concerning taxation and spending to influence the economy.

Federal Budget Deficit

The financial shortfall when a government's expenditures exceed its revenues within a fiscal year.