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.

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Definitions:

Impression Management

The process by which individuals attempt to control the impressions others form of them, especially in social interactions and presentation of self.

Rational Choice

A theory in economics and sociology that suggests individuals always make prudent and logical decisions, aiming to maximize personal benefit.

Charles Derber

An American sociologist and author known for his work on environmental sustainability, economic inequality, corporate power, and globalization.

Social Interaction

The process by which individuals act and react in relation to others, forming the basis of social relationships and structure.