Given a Normal IS-LM Model, Which of the Following Is

question 41

Multiple Choice

Given a normal IS-LM model, which of the following is FALSE?

• A)expansionary monetary policy will increase the level of investment and consumption
• B)lower income tax rates will raise the level of consumption but lower the level of investment
• C)a cut in government transfer payments will reduce consumption and interest rates
• D)an investment subsidy will increase the level of investment but not the level of consumption
• E)restrictive monetary policy will lower consumption, investment, and the budget surplus

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Definitions:

Economic Profits

The difference between a firm’s total revenue and its total costs, including both explicit and implicit costs.

Exiting

The process of leaving or withdrawing from a particular situation, status, or location, often used in the context of businesses or markets.

Perfectly Competitive Market

A market structure characterized by infinite buyers and sellers, freedom of entry and exit, and perfect information, where no single entity can influence the market price.

Unique Goods

Products or services that are distinctive due to their rarity, design, or attributes, making them unlike any other in the market.