Suppose the Federal Government Is Successful in Enacting Tariffs Large

question 238

Multiple Choice

Suppose the federal government is successful in enacting tariffs large enough to eliminate the current account deficit.What would happen to the level of domestic investment?

• A)It would not change.
• B)It would rise and exceed national saving.
• C)It would rise to a level equal to net foreign investment.
• D)It would fall to a level equal to national saving.
• E)It would rise to a level equal to exports.

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Definitions:

Average Rate Of Return Method

An investment appraisal technique that calculates the expected return of an investment by averaging its annual profits and dividing by its initial cost.

Net Present Value Method

A method used in capital budgeting and investment planning that calculates the difference between the present value of cash inflows and the present value of cash outflows over a period of time.

Net Present Value Method

A financial analysis tool used to determine the attractiveness of an investment by calculating the present value of its future cash flows.

Present Values

The present-day worth of a future sum of money or continual cash flows, using a particular rate of return for calculation.