Assume that investment spending is no longer affected by output but only by interest rates. Given this information, a reduction in government spending: will have no effect on investment. will cause investment to decrease. will cause a reduction in output and have no effect on the interest rate. none of these answers. will have no effect on output.
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- When comparing an increase in government spending on goods and services to an increase in private investment spending, in the short run Group of answer choices they will both shift aggregate supply. government spending will shift the aggregate demand and private investment the aggregate supply. government spending is inflationary; private investment is not. they will both shift aggregate demand.Governments attempt to stimulate economies by offering firms temporary investment tax credits. Explain the effects of this measure on investment spending. Would you expect a permanent or temporary measure to have more effect.It is assumed that everything else stays constant. The economy has Consumption $90, Investment spending $100, Government expenditure on goods and services $80, Tax revenues $50, Exports $50, Imports $60. And marginal propensity to consume is assumed to be 0.7. When the potential output of the economy (or long run output) is $250, what should be government spending in order to close an output gap?
- Suppose the marginal propensity to consume equals 0.8 (i.e., c1 = 0.8). Given this information, which of the following events will cause the largest increase in output? Select one or more: a. Public spending, G, increases by 200 b. real GDP was larger than nominal GDP from 2002 to 2008 Public spending, G, increases by 150 c. Investment, I, increases by 150 d. Taxes, T, decrease by 200The economy is in a recession. The government enacts a policy to increase spending by $2 billion. The MPS is 0.25. What would be the full increase in real GDP from the change in government spending, assuming that the aggregate supply curve is horizontal across the range of GDP being considered? Multiple Choice $8 billion $2 billion $16 billion $4 billionMultiple choice If the marginal propensity to consume increases: (1) The slope of the consumption function will be steeper;(2) There will be a movement from left to right along the consumption function;(3) The consumption function will shift parallel upwards;(4) The consumption function will shift parallel downwards.
- Which of the following would be most likely to increase consumption spending? Selected answer will be automatically saved. For keyboard navigation, press up/down arrow keys to select an answer. a A reduction in consumer credit card debt b A drop in stock prices c A higher interest rate d The expectation of lower future pricesWhich of the following will increase consumption spending? Group of answer choices a housing market crash an increase in the personal income tax rate a boom in the stock market an increase in the nominal interest rateAn increase in the interest rate would shift the consumption function upward. True or False
- Crowding out will be greater A. the more sensitive investment spending is to changes in the interest rate. B. if the economy is in recession, rather than at full employment. C. the further equilibrium GDP is below potential GDP. D. the less sensitive consumption spending is to changes in the interest rate.As shown in Exhibit 2, dissaving occurs: Group of answer choices at $5 trillion. between 0 and $4 trillion. where disposable income is greater than $4 trillion. at $8 trillion.If consumption is $8 billion when disposable income is $0, and if the marginal propensity to consume is 0.60, find the national consumption function C(y) (in billions of dollars).