Rather than cut consumption during any year to make a productive investment, an open-economy nation that chooses to finance investment and preserve consumption during the first year:
A) is always worse off.
B) is better off if the return is greater than the rate of interest.
C) must repay the investment 10 times over because of compounding.
D) is subject to criticism for policies that favor rich investors.

Question

Quizplus · Accepted Answer

By financing investment and preserving consumption during the first year, the nation can potentially earn a return on the investment. As long as the return is greater than the rate of interest, the nation will be better off in the long run. This approach allows for economic growth without sacrificing immediate consumption.

Rather Than Cut Consumption During Any Year to Make a Productive