Consider the Following Two Events: (I) an Increase in the Cost

question 2

Multiple Choice

Consider the following two events: (i) an increase in the cost of new capital goods; and (ii) a decrease in corporate income tax rates. How will these events affect the demand for investment?

• A) The demand for investment increases.
• B) The demand for investment decreases.
• C) The two events have opposite effects on investment. Therefore, the demand for investment remains the same.
• D) These events have an indeterminate effect on the demand for investment.

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Definitions:

External Cause

Factors outside an individual that can lead to certain outcomes or effects.

Consistent Behavior

A pattern of actions or responses that remains uniform over time in a particular individual or situation.

Attribution

The process of explaining one's own behavior and the behavior of others.

Assigning Causes

The process of attributing reasons or explanations to events, actions, or outcomes, often to understand or predict behavior.