Practice Quiz

Case Interview Prep

Category - Economics

Start a Study Session Sign up for Question of the Day
The Netherlands is considered to have an open economy. In an open economy, government budget deficit results in the following EXCEPT:
  1. increase in domestic investment
  2. reduction of loanable funds supply
  3. increase in interest rate
  4. decrease in net foreign investment
Explanation
Answer: A - In an open economy, government budget deficit does not result in an increase in domestic investment.

Key Takeaway: In an open economy, government budget deficits have a negative impact. Among the impact are an increase in interest rates which leads to a reduction in domestic investment. These deficits also lead to a decrease in net foreign investment and a reduction of loanable funds supplies.
Was this helpful? Upvote!
Login to contribute your own answer or details
Start a Study Session Sign up for Question of the Day

Top questions

Related questions

Most popular on PracticeQuiz