Brief Principles of Macroeconomics...
Brief Principles of Macroeconomics...
In which of the following circumstances is expansionary fiscal policy more likely to lead to a short-run increase in investment? Explain.
a. When the investment accelerator is large or when it is small?
b. When the interest sensitivity of investment is large or when it is small?
Subpart (a):
Expansionary fiscal policy, investment accelerator, and interest rate sensitivity to investment.
Expansionary fiscal policy is more likely to lead to a short run increase in investment, when the investment accelerator is large. This is because expansionary fiscal policy causes an increase in aggregate demand, whic...
Subpart (b):
Expansionary fiscal policy, investment accelerator, and interest rate sensitivity to investment.
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