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.

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Definitions:

Tax Imposed

An obligatory financial charge or other type of levy imposed upon a taxpayer by a governmental organization in order to fund government spending and various public expenditures.

Grapefruit

A citrus fruit known for its slightly bitter and sour taste, often eaten as part of breakfast or used in cooking.

Equilibrium Price

The price at which the quantity of goods supplied is equal to the quantity of goods demanded.

Inverse Demand Function

A function that expresses the price of a good or service as a function of the quantity demanded, typically used in economics to determine pricing strategies.