Holding Other Factors Constant, If Congress Passes a 5% Investment

question 138

Multiple Choice

Holding other factors constant, if Congress passes a 5% investment tax credit under which a firm receives $5 in tax refunds from the government for every $100 it spends on new capital equipment, then the real interest rate will ________ and the equilibrium quantity of national saving and investment will ________.

• A)increase; increase
• B)increase; decrease
• C)increase; not change
• D)decrease; increase

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Definitions:

Time Plots

Charts that display values against time, allowing for the observation of trends, patterns, and seasonal variations in data series.

Explanatory Variable

In statistical modeling, an explanatory variable is one that is manipulated or categorized to assess its effect on a response variable.

Scatterplot

A type of graph used in statistics to display values for two variables for a set of data.

Density Curve

A smooth curve used in statistics to describe the distribution of a continuous probability variable; its area under the curve sums to 1.