In the Basic Model of a Small Open Economy,if the Government

question 115

Multiple Choice

In the basic model of a small open economy,if the government encourages investment,say through an investment tax credit,investment:

• A) increases and is financed through an increase in national saving.
• B) increases and is financed through an increase in exports.
• C) increases and is financed through an inflow of foreign capital.
• D) does not increase; the interest rate rises instead.