Expansionary Fiscal Policy Can Be Successful Without a Negative Impact

question 15

Multiple Choice

Expansionary fiscal policy can be successful without a negative impact on the level of investment if

• A)the government spending increase is financed by a tax increase
• B)the Fed undertakes open market sales at the same time
• C)it is implemented via an investment subsidy rather than a cut in personal income taxes
• D)money demand is completely interest inelastic
• E)it is implemented through a cut in personal income taxes rather than an increase in government purchases

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Definitions:

Earnings Per Share

A measure of a company's profitability, calculated as the profit available to common shareholders divided by the average number of common shares outstanding.

Working Capital

The variance between a business's present assets and its present debts, which demonstrates the firm's liquidity.

Common Stock

A type of equity security that represents ownership in a corporation, with rights to vote on corporate matters and receive dividends.

Market Price

The existing rate for buying or selling a product or service in a market environment.