An Increase in the Sensitivity of Private Spending (Consumption,investment,and Net

question 160

Multiple Choice

An increase in the sensitivity of private spending (consumption,investment,and net exports) to changes in the interest rate ________ the government purchases multiplier.

• A)will decrease
• B)will increase
• C)will not change
• D)may increase or may decrease

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Definitions:

Capital Improvements

Expenditures relating to the upgrade, enhancement, or expansion of physical assets, increasing their useful life or value.

Expansion

Expansion refers to the phase of business growth and economic development where a company or economy sees an increase in scale, output, or market reach.

Negative NPV

A condition where the net present value of all cash flows associated with a project or investment is negative, indicating that it is not financially viable.

Payback Period

The length of time it takes to recover the cost of an investment.