Based on the neoclassical theory of investment, which aspect of a booming economy helps to explain the procyclicality of investment?
A) Tax revenues are likely to be rising.
B) The real interest rate is likely to be rising.
C) Capital goods are becoming more expensive.
D) Financing constraints are likely to be relaxed for many businesses.
Question 2
A current account deficit is
A) good because a country wants to own the others.
B) bad because every country should have a surplus.
C) good because it allows to smooth consumption.
D) it does not matter.
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