In a Small Open Economy, If the Government Encourages Investment

question 39

Multiple Choice

In a small open economy, if the government encourages investment, through, say, an investment tax credit, investment:

• A) increases and is financed through an increase in national saving.
• B) increases and is financed through an increase in exports.
• C) increases and is financed through an inflow of foreign capital.
• D) does not increase; the interest rate rises instead.

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Definitions:

Conditioning

The process of learning associations between environmental events and behavioral responses, typically discussed in the context of classical and operative conditioning.

Spotlight Effect

The psychological tendency to overestimate the extent to which our actions and appearance are noticed by others.

Current

Pertaining to the present time or most recent; also refers to a flow of electricity through a conductor.

Past

Refers to all events or periods that have occurred before the present time, often studied in the context of history to understand patterns of change and development.