Suppose a country institutes an investment tax credit and that leads to an initial increase in investment spending of $100 billion. Suppose the multiplier is 1.5 and the economy's real GDP is $5,000 billion. This action is
A) expansionary and will shift the aggregate demand curve to the right by $750 billion.
B) expansionary and will shift the aggregate demand curve to the right by $150 billion.
C) expansionary and will shift the aggregate demand curve to the left by $7500 billion.
D) expansionary and will shift the aggregate demand curve to the left by $150 billion.
Ans: B) expansionary and will shift the aggregate demand curve to the right by $150 billion.
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The economic system of the United States
A) was designed by mercantilists and capitalists. B) was designed by the framers of the U.S. constitution. C) was designed to maximize individual freedom. D) was designed to maximize output per capita. E) was the result of human intentions but not anyone's design.
Ronald Coase is famous for the Coase Theorem, which is based on the premise that there is an economically efficient level of pollution reduction
Many economists believe that the tradable emissions allowance program that has been used to deal with the problem of acid rain has been successful in reducing emissions of sulfur dioxide in an economically efficient manner. Why isn't this program an example of the Coase Theorem?
The HO model predicts that once trade begins factor prices will equalize between countries. This result occurs because of the assumption of
A) identical technology sets available to each country. B) constant opportunity costs. C) one factor of production. D) free international mobility of factors.
Although the FDIC was created to prevent bank failures, its existence encourages banks to
A) take too much risk. B) hold too much capital. C) open too many branches. D) buy too much stock.