Two Nations Are Located Next to One Another

question 4

Multiple Choice

Two nations are located next to one another.In Nation A,people are very thrifty and spend much less than their incomes; moreover,Nation A's government runs a balanced budget every year.In Nation B,people spend all of their incomes,but their government runs consistent deficits.Thus,

• A) Nation A's extra savings would increase the supply of loanable funds to Nation B.
• B) Nation B's government deficit would be a supply of loanable funds to Nation B.
• C) Nation A's extra savings would increase the demand for loanable funds in Nation B.
• D) Nation B would instantly default on all of its debt obligations.
• E) Nation A's extra savings would decrease the supply of loanable funds to Nation B.

---

Definitions:

Landlord

An owner of property who rents it out to tenants in exchange for monthly rent.

Agreement For Sale

An agreement where title will be transferred at some time in the future, typically once the property is fully paid for; an agreement that grants possession of property to the purchaser pending full payment of the price.

Retake Possession

The act of reclaiming ownership or control of property, typically by a seller or lender from whom the property was bought on credit or leased.

Pay Installments

To make payments for a good or service over a period of time in portions, rather than paying the full amount upfront.