Question

1.5 pts Questa 65 Candigaristomed to plain which of the following? Owendamente inestment does not equa/ domestic says Oweepers.comistently exceed imports Owhen government borrowing and wendig results in higher interest rates when diesen leads to creased itation Question 46 1.5 pts According to recent studies households countries cannot push themselves out of poverty explains why many households in low-income Otamot actor invest in physical or human capital Ottoprey to predatory prennent actions Hot and our jobs that spend their money rivolously and urwisely cause acute debt and D Question 47

Answer 1

Answer:

Q 45. When government borrowing and spending results in higher interest rates.

reason: When government borrows heavily from loanable funds market in order to finance its budget deficit, the demand for loanable funds increases. The demand curve shifts to the right, indicating an increase in the loanable funds, resulting in the increase in interest rates. The individual investors get discouraged from investing by this high interest rate. Thus the government literally crowds out private investors.

Q 46. that cannot accumulate or invest in physical or human capital

reason: Households in low-income countries face the disadvantage that they must spend all their income immediately on basic necessities like food; so no income is left for investment. Their saving is negligible or none at all which results in no capital accumulation. This results in lack of supply of loanable funds for investment in physical or human capital, leaving thes houselhlds in the mire of poverty.