答案如下
According to the crowding-out model, which of the following best describes the relationship between budget deficits and trade deficits? Budget deficits tend to cause real interest rates to:
A) increase; the value of the domestic currency then increases, and exports decrease.
B) increase; the value of the domestic currency then decreases, and exports increase.
C) decrease; the value of the domestic currency increases, and exports decrease.
D) decrease; the value of the domestic currency decrease, and exports increase.
answer
Your answer: A was correct!
According to the crowding-out model, budget deficits result in government borrowing which tends to cause increased demand for funds, causing real interest rates to rise and foreign investment to increase, increasing the value of the domestic currency. Given an increase in the value of the domestic currency, domestic exports decrease. Empirical evidence does not support the effect of deficits on real interest rates, but does support the negative effect on the level of domestic exports.
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发表于 2006-3-24 15:14
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