If a Government Increases Its Budget Deficit,then Domestic Interest Rates

question 74

Multiple Choice

If a government increases its budget deficit,then domestic interest rates

• A)and net exports rise.
• B)rise and net exports fall.
• C)fall and net exports rise.
• D)and net exports fall.

---

Definitions:

Capital Budgeting

The process of evaluating and selecting long-term investments that are in line with the goal of shareholder wealth maximization.

Cost of Capital

The rate of return that a business must earn on its investment projects to increase or maintain its value, encompassing the cost of debt and equity.

Real Option

The flexibility to make decisions on investments, such as the timing of projects or the expansion of operations, based on the evolution of market conditions.

Expansion Option

The opportunity or ability to invest additional capital in a project, based on its successful performance or other factors.