In a Two-Good,two-Period Model,holding Everything Else Constant,an Increase in Government

question 56

Multiple Choice

In a two-good,two-period model,holding everything else constant,an increase in government spending

• A) unambiguously increases the current account surplus.
• B) unambiguously decreases the current account surplus.
• C) has an uncertain effect on the current account surplus.
• D) has no effect on the current account surplus.
• E) only marginally increases the current account surplus.

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Definitions:

Cash Flows

Financial statement entries that represent the net amount of cash and cash equivalents being transferred into and out of a business.

Credit Evaluations

Assessments conducted to determine the creditworthiness of individuals or entities, analyzing their ability to repay debts based on past and current financial activity.

Lending Decisions

The process undertaken by financial institutions to assess the creditworthiness of potential borrowers and decide whether to extend credit.

Long-term Borrowing

Debt obtained by a company with repayment terms extending beyond one year, used to finance the company's long-term investments and operations.