An Increase in Government Expenditures Leads to

question 8

Multiple Choice

An increase in government expenditures leads to

• A)a rightward shift in the IS curve
• B)a rightward shift in the AD curve
• C)an increase in the level of national income
• D)all of the above

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Definitions:

Capital Investment

The expenditure of funds by a firm to acquire physical assets, such as property, plant, or equipment, to improve its long-term income and profitability.

Net Present Value Method

A method of analysis of proposed capital investments that subtracts the amount to be invested from the present value of the cash flows expected from the investments.

Cash Payback Method

A capital budgeting technique that calculates the time required to recoup the cost of an investment based on its expected cash flows.

Capital Investment

Funding provided to a business entity to purchase physical assets, like equipment or buildings, or to use in operations to stimulate growth.