Suppose a country had a smaller increase in debt in 2011 than it had in 2010.Then other things the same,we would expect
A)lower interest rates and investment in 2011 than in 2010.
B)lower interest rates and greater investment in 2011 than in 2010.
C)higher interest rates and greater investment in 2011 than in 2010.
D)higher interest rates and lower investment in 2011 than in 2010.

Question

Quizplus · Accepted Answer

When a country has a smaller increase in its debt, it implies that the government is borrowing less, which may lead to lower interest rates. Lower interest rates would encourage greater investment because borrowing cost is reduced, thus making it more attractive for businesses to invest in the country. Therefore, we can expect a lower interest rate and greater investment in 2011 than in 2010.

Suppose a Country Had a Smaller Increase in Debt in 2011