By driving up interest rates, an increase in investment spending causes
a. a voluntary decrease in consumption
b. a voluntary increase in consumption
c. an involuntary decrease in consumption
d. an involuntary increase in consumption
e. government spending to be crowded out
A
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Suppose that IS and LM intersect at full-employment output. A rightward shift of IS will be followed by a __________ price level that shifts LM to the __________ in a return to full-employment
A) rising; right B) rising; left C) falling; right D) falling; left
In the aggregate demand-aggregate supply model, if entrepreneurs become convinced that future profitability of capital has increased,
A) current output will fall, but the price level will rise. B) current output will rise, but the price level will fall. C) current output and the price level will both rise. D) current output and the price level will both fall.