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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European City

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New York

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