Which of the following lists contains only things that increase when the budget deficit of the Canadian government increases?
A)Canadian supply of loanable funds, Canadian domestic investment
B)Canadian imports, the real exchange rate of the dollar
C)The real exchange rate of the dollar, Canadian domestic investment
D)the real exchange rate of the dollar, Canadian net exports

Question

Quizplus · Accepted Answer

When the budget deficit increases, the government borrows more, leading to higher interest rates, which can appreciate the currency (increasing the real exchange rate) and make imports cheaper, thus increasing imports.

Which of the Following Lists Contains Only Things That Increase