An Increase in the Budget Deficit Causes Domestic Interest Rates

question 170

Multiple Choice

An increase in the budget deficit causes domestic interest rates

• A)and net capital outflow to rise.
• B)to rise and net capital outflow to fall.
• C)to fall and net capital outflow to rise.
• D)and net capital outflow to fall.

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Definitions:

Market Price

The current price at which an asset or service can be bought or sold.

Risky

Characterized by or involving uncertainty, potential danger, or financial loss.

Interest Rates

The cost of borrowing money or the return on investment, expressed as a percentage, that lenders charge borrowers over a specified period.

Values of Bonds

The worth or price of a bond, influenced by interest rates, the bond's credit quality, and the duration until maturity.