Which of the Following Illustrates How the Investment Accelerator Works

question 79

Multiple Choice

Which of the following illustrates how the investment accelerator works?

• A)An increase in government expenditures increases aggregate spending so that SnoozeBargain Co.decides to modernize its motels.
• B)An increase in government expenditures increases the interest rate so that SnoozeBargain Co.decides to modernize its motels.
• C)An increase in government expenditures increases the interest rate so that the demand for stocks and bonds issued by SnoozeBargain Co.rises.
• D)An increase in government expenditures decreases the interest rate so that SnoozeBargain Co.decides to modernize its motels.

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Definitions:

Trade Policies

Measures and agreements set by governments to control exports and imports with the aim to protect domestic industries, manage the balance of payments, and promote economic growth.

Standard Of Living

The level of wealth, comfort, material goods, and necessities available to a certain socioeconomic class or a certain geographic area.

Loanable Funds

The money available for borrowing in the financial markets, determined by savings and demands for investment.

Public Saving

The tax revenue that the government has left after paying for its spending.