Suppose Business Confidence Decreases Causing a Reduction in Investment

question 3

Multiple Choice

Suppose business confidence decreases causing a reduction in investment.Based on our understanding of the model presented in Chapter 3,we know with certainty that a reduction in investment will cause

• A)an increase in the multiplier.
• B)a reduction in the multiplier.
• C)a reduction in the marginal propensity to save.
• D)a reduction in consumption as the economy adjusts to this decrease in investment.

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