Which of the Following Would Cause Investment Spending to Increase

question 9

Multiple Choice

Which of the following would cause investment spending to increase and aggregate demand to shift right?

• A)an increase in the money supply, but not an investment tax credit
• B)an investment tax credit, but not an increase in the money supply
• C)both an increase in the money supply and an investment tax credit
• D)None of the above are correct.

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Definitions:

Government Failure

Occurs when government intervention in the economy leads to an inefficient allocation of resources or fails to achieve the intended outcomes.

Public Choice Theory

A theory in economics and political science that studies how public sector actions and policies are influenced by the self-interest of individuals, especially politicians and bureaucrats, as opposed to the public good.

Keynesian Economics

An economic theory stating that government intervention is necessary to help economies emerge from recession, through policies that stimulate demand, control inflation, and adjust interest rates.