If the Interest Rate Rises and Government Spending Falls, What

question 98

Multiple Choice

If the interest rate rises and government spending falls, what will happen to output, ceteris paribus?

• A) It will rise.
• B) It will stay the same.
• C) It will fall.
• D) It is uncertain what will happen.

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Definitions:

Money Inflows

Financial resources entering a particular entity, such as a business or country, over a period of time.

Financial Account Balance

A component of a country's balance of payments that records transactions of foreign investment associated with that country.

Real and Financial Assets

Real assets are physical or tangible assets like real estate, while financial assets are intangible and represent a claim on future income or assets, such as stocks and bonds.

Money Inflows

Funds entering an economy, organization, or financial account, often measured over a set period of time.