There Is an Increase in Government Expenditures Financed by Taxes

question 71

Multiple Choice

There is an increase in government expenditures financed by taxes and its overall short-run effect on output is larger than the change in government spending.Which of the following is correct?

• A)By themselves,both the change in output and the change in the interest rate increase desired investment.
• B)By themselves,both the change in output and the change in the interest rate decrease desired investment.
• C)By itself,the change in output increases desired investment spending and by itself the change in the interest rate decreases desired investment spending.
• D)By itself,the change in output decreases desired investment spending and by itself the change in the interest rate increases desired investment spending.

---

Definitions:

Annual Rate

Typically refers to the interest rate for a whole year, often applied in terms of loans, investments, or savings.

Invests

The act of allocating resources, usually money, with the expectation of generating an income or profit.

Present Value

The present value of a sum of money or sequence of cash flows expected in the future, calculated using a certain rate of return.

Discounting

A financial process of determining the present value of a payment or a series of payments that will be made in the future.