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- Subject
- Budget Deficits And The Trade Balanceeconomics-mcqs › budget-deficits-and-the-trade-balance
- Published
- 2 Jun 2019
- Last updated
- 28 May 2026
Explanation
An increase in the government budget deficit typically leads to higher real interest rates, which in turn discourages private investment by making borrowing more expensive. This phenomenon is known as 'crowding out.' Therefore, option D correctly describes this relationship.
More Budget Deficits And The Trade Balance MCQs
Practice related questions from the same subject.
- 1.Which economic policy is expected to produce effects contrary to those of an export subsidy?
- 2.Which of these groups would gain no advantage from an EU import quota on Japanese automobiles?
- 3.Which of the following statements regarding a nation's trade policy is accurate?
- 4.If, due to political turmoil, Russian investors decide to buy more UK assets instead of Russian ones, what is the impact on the UK's net foreign investment?
- 5.If the European Union enforces a quota limiting the import of clothing made in China, thereby reducing the UK's clothing imports, which statement accurately describes the impact on the foreign exchange market for the British pound?
- 6.How would a rise in European demand for Hondas manufactured in the UK affect the value of the British pound?
- 7.What is the impact of capital flight on a nation's net exports and its long-term economic growth?
- 8.Which of the following parties would be most negatively impacted by a budget deficit in the UK government?
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