Which of the following illustrates how the investment accelerator works?
a. An increase in government expenditures increases aggregate spending so that SnoozeBargain Co. decides to modernize its motels.
b. An increase in government expenditures increases the interest rate so that SnoozeBargain Co. decides to modernize its motels.
c. An increase in government expenditures increases the interest rate so that the demand for stocks and bonds issued by SnoozeBargain Co. rises.
d. An increase in government expenditures decreases the interest rate so that SnoozeBargain Co. decides to modernize its motels.
a
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The above table gives data for the nation of South Hampton. There are no imports into or exports from South Hampton. Aggregate planned expenditure is less than actual expenditure if real GDP is
A) $700 billion. B) more than $700 billion. C) less than $700 billion. D) at the equilibrium level. E) Both answers A and C are correct.
In a competitive free market:
A) all exchanges take place involuntarily. B) there is only one seller and many buyers. C) the government does not impose price controls. D) there is no provision for the protection of property rights.