Following a decrease in government spending, as the price level falls we would expect the level of interest rates to ________ and investment to ________.
A) decrease; increase B) increase; decrease C) decrease; decrease D) increase; increase
Question 2
If the United States has a net export deficit, which of the following must be true? (Assume that the capital account is zero and net transfers are zero.)
A) Net foreign investment must be negative as well.
B) Domestic private saving must be less than net foreign investment.
C) Domestic public saving must be less than net foreign investment.
D) The balance on the financial account must equal the balance on the current account.
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