An Increase in the Trade Surplus of a Small Open

question 72

Multiple Choice

An increase in the trade surplus of a small open economy could be the result of:

• A) a domestic tax cut.
• B) an increase in government spending.
• C) a decrease in the world interest rate.
• D) the implementation of an investment tax-credit provision.

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Definitions:

Lifetime Consumption

Refers to the total amount of goods and services consumed by an individual over the entirety of their life.

Real Interest Rate

The interest rate that has been adjusted to remove the effects of inflation, reflecting the true cost of borrowing.

Brokerage Costs

Fees charged by a broker for executing transactions or providing specialized services.

Financial Intermediaries

Institutions that serve as middlemen between savers and borrowers, like banks, insurance companies, and investment firms, facilitating the flow of funds in the economy.