How Might a Budget Deficit Affect the Balance of Trade

question 148

Multiple Choice

How might a budget deficit affect the balance of trade?

• A)A budget deficit raises interest rates, which raises exchange rates and increases the balance of trade.
• B)A budget deficit raises interest rates, which raises exchange rates and reduces the balance of trade.
• C)A budget deficit reduces interest rates, which raises exchange rates and reduces the balance of trade.
• D)A budget deficit reduces interest rates, which reduces exchange rates and reduces the balance of trade.
• E)A budget deficit raises interest rates, which reduces exchange rates, and reduces the balance of trade.

---

Definitions:

Pepsi

A carbonated soft drink produced and manufactured by PepsiCo, serving as a major competitor in the global beverage market.

Market Demand Curve

A graphical representation that shows the relationship between the price of a good and the total quantity demanded by all consumers in the market.

Horizontally Summing

The process of adding demand or supply curves across different markets or individuals to get a cumulative total.

Demand Curves

Graphical representations showing the relationship between the price of a product and the quantity of the product that consumers are willing to buy.