If an Increase in Government Spending Causes an Increase in Government

question 250

Multiple Choice

If an increase in government spending causes an increase in government borrowing, this could induce

• A) an increase in interest rates, which would cause private domestic investment to fall.
• B) an increase in interest rates, which would cause private domestic investment to rise.
• C) an increase in interest rates but no effect on private domestic investment.
• D) a decrease in interest rates, which would cause private domestic investment to rise.

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Definitions:

Static Budget

A budget that does not change or adjust with variations in sales volume or business activity.

Original Planned

Pertains to the initial strategy or set of actions that were designed to achieve a specific outcome or goal.

Activity Level

A measure of the volume of production or operations, often influencing costs and profitability in businesses.

Management by Exception

A management strategy where only significant deviations from set plans, standards, or objectives are brought to the attention of management.