What Do Investment and Government Expenditures Have in Common

question 49

Multiple Choice

What do investment and government expenditures have in common?

• A) Both represent injections to the circular flow.
• B) Both represent leakages from the circular flow.
• C) Neither is subject to the multiplier effect.
• D) Both represent a decline in indebtedness.

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Definitions:

Inelastic

Describing a situation where the demand or supply for a product does not significantly change in response to a change in price.

Excise Tax

A tax levied on specific goods, services, or transactions, often with the aim of reducing their consumption.

Producer Surplus

The distinction between the acceptable selling price for producers of a good or service and the actual price achieved.

Equilibrium

The state in which market supply and demand balance each other, and as a result, prices become stable.