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36. Which of the following illustrates how the investment accelerator

Question : 36. Which of the following illustrates how the investment accelerator : 2092459

36. Which of the following illustrates how the investment accelerator works?

a.

An increase in government expenditures increases the interest rate so that the Burgerville chain of restaurants decides to build fewer new restaurants.

b.

An increase in government expenditures increases aggregate spending so that Burgerville finds it profitable to build more new restaurants.

c.

An increase in government expenditures increases the interest rate so that the demand for stocks and bonds issued by Burgerville increases.

d.

An increase in government expenditures decreases the interest rate so that Burgerville decides to build more new restaurants.

 

37. Which of the following illustrates how the investment accelerator works?

a.

An increase in government expenditures increases aggregate spending so that Gas-n-Go decides to modernize its gas stations.

b.

An increase in government expenditures increases the interest rate so that Gas-n-Go decides to modernize its gas stations.

c.

An increase in government expenditures increases the interest rate so that the demand for stocks and bonds issued by Gas-n-Go rises.

d.

An increase in government expenditures decreases the interest rate so that Gas-n-Go decides to modernize its gas stations.

 

38. The positive feedback from aggregate demand to investment is called

a.

the investment multiplier.

b.

the stock-market effect.

c.

the investment accelerator.

d.

the crowding-in multiplier.

 

39. The change in aggregate demand that results from fiscal expansion changing the interest rate is called the

a.

multiplier effect.

b.

crowding-out effect.

c.

accelerator effect.

d.

Ricardian equivalence effect.

 

40. Which of the following correctly explains the crowding-out effect?

a.

An increase in government expenditures decreases the interest rate and so increases investment spending.

b.

An increase in government expenditures increases the interest rate and so reduces investment spending.

c.

A decrease in government expenditures increases the interest rate and so increases investment spending.

d.

A decrease in government expenditures decreases the interest rate and so reduces investment spending.

 

 

 

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