Which of the following statements is correct?

Question

Quizplus · Accepted Answer

Smaller domestic capital stock will result in lower future output and income. This is because a lower capital stock means less productive capacity, which leads to lower output and income in the long run. Option A is incorrect as sustained budget deficits may lead to increased domestic investment, but it is not guaranteed. Option B is incorrect as sustained increases in domestic investment will lead to an increase in the domestic capital stock, not a decrease. Option D is incorrect as a sustained budget deficit may result in lower economic growth, leading to a lower GDP.

Which of the Following Statements Is Correct