question 13 & 14

13. According to the traditional view on government debt, if taxes are cut without reducing government spending, then the short-run international effect will initially be a capital and a trade a. inflow; deficit b. inflow, surplus c. outflow, deficit d. outflow; surplus 14. Large persistent government budget deficits may have various effects on the economy. Which of the following would be one of their potential effects? a. encourage excessively expansionary monetary policy b. increase the risk of government default risk. c. raise the interest rate. d. discourage investment and hence reduce growth e. All of the above