Which of the Following Illustrates How the Investment Accelerator Works

question 207

Multiple Choice

Which of the following illustrates how the investment accelerator works?

• A)An increase in government expenditures increases the interest rate so that the Sleepwell Hotel chain decides to build fewer new hotels.
• B)An increase in government expenditures increases aggregate spending so that the Sleepwell Hotel chain finds it profitable to build more new hotels.
• C)An increase in government expenditures increases the interest rate so that the demand for stocks and bonds issued by the Sleepwell Hotel chain rises.
• D)An increase in government expenditures decreases the interest rate so that the Sleepwell Hotel chain decides to build more new hotels.

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Definitions:

Ledger

A book or database in which financial transactions are recorded systematically.

Source Documents

Original records that provide evidence that a transaction has occurred, such as receipts, invoices, checks, or bank statements.

Unearned Revenue

Money received by a business for goods or services yet to be provided; it is recorded as a liability until the goods or services are delivered.

Balance Sheet

A financial document showing what a company owns, owes, and the equity of its shareholders at a fixed point in time.