Assume That Investment Spending Depends Only on Output and No

question 39

Multiple Choice

Assume that investment spending depends only on output and no longer depends on the interest rate. Given this information, a decrease in government spending:

• A) will cause investment to increase.
• B) may cause investment to increase or to decrease.
• C) will have no effect on investment.
• D) will cause an increase in investment if the interest rate decreases.
• E) will cause investment to decrease.

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Definitions:

Agricultural Commodities

Basic goods used in commerce that are interchangeable with other goods of the same type, produced through farming activities.

Price Support Program

Governmental policies designed to maintain the price of a commodity at a certain level, to protect producers from market volatility.

Surplus

The amount by which the quantity supplied of a product exceeds the quantity demanded at a specific price.

Price Support Program

Government initiatives aimed at maintaining the market price of a commodity above its competitive equilibrium level.