Higher Interest Rates as a Result of Deficit Spending

question 1

Multiple Choice

Higher interest rates as a result of deficit spending

• A) raise growth in investment spending.
• B) ultimately have a positive impact on productivity gains and society's standard of living.
• C) increase the wealth of future generations.
• D) crowd out private investment.

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Definitions:

Sinking Funds

Specialized funds set aside or saved by a company to repay debt or bonds, or to replace capital assets in the future.

Unrecoverable Costs

Expenses that have been paid and cannot be recovered, often referred to as sunk costs, which should not factor into future spending decisions.

Fixed Costs

Costs that do not change with the level of output or sales, such as rent, salaries, or loan repayments.

Variable Costs

Expenses that vary directly with the amount of production output of a company.