Other Things the Same,an Increase in the Budget Deficit

question 194

Multiple Choice

Other things the same,an increase in the budget deficit

• A)shifts the demand for loanable funds right,so the interest rate rises.
• B)shifts the demand for loanable funds left,so the interest rate falls.
• C)shifts the supply of loanable funds right,so the interest rate falls.
• D)shifts the supply of loanable funds left,so the interest rate rises.

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Definitions:

Certainty Equivalent Approach

The Certainty Equivalent Approach is a method used in finance to evaluate investments by adjusting uncertain future cash flows to their guaranteed amounts.

Capital Budgeting

The process of allocating resources for significant investments or projects in a company, assessing their potential financial returns and risks.

Opportunity Costs

The cost of choosing one option instead of the next best alternative, representing the benefits missed out on.

Certainty Equivalent Factors

The adjusted value of risky outcomes to reflect the investor's risk aversion, often used in capital budgeting.