An increase in government spending
What will be an ideal response?
has a similar effect to an increase in private fixed investment. It shifts the AD line upward, as government spending rises. This increases the equilibrium levels of income and output. The increase in Y is larger than that of G because of the multiplier effect, which occurs due to the induced consumption that occurs as the economy expands along the AD line.
Economics
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In comparison to a government that runs a balanced budget, when the government runs a budget deficit,
A) business investment will fall. B) the equilibrium interest rate will fall. C) household savings will fall. D) none of the above
Economics
The difference between a firm's assets and its liabilities is known as:
A) limited liability B) stock C) equity D) profit
Economics