1589794 a Aplia ECON 101 11 all 2017 Home Grades Personalized Reviews D The Infl

Question

1589794 a Aplia ECON 101 11 all 2017 Home Grades Personalized Reviews D The Influence of Monetary and Fiscal Policy on Aggregate Demand: Algorithmic End of Chapter Practice l Read Chapter 21 | Back to Attempts: Score: /2 10. Problems and Applications Q10 Expansionary fiscal policy is more likely to lead to a short-run increase in investment when the investment accelerator is Expansionary fiscal policy is more likely to lead to a short-run increase in investment when the interest rate sensitivity of investment is Copyright NoticesTerms of Use Privacy NoticeSecurity NoticeAccessibility

Explanation / Answer

Expansionary fiscal.policy is more likely to lead to a short run increase in investment when the investment accelerator is large and this is because a large investment accelerator means that the increase in output induces the increase in investment and without a proper large accelerator, there can be a fall of investment and this is because the increase in aggregate demand will increase the interest rate.

Therefore 'large' is the answer.

Similarly the expansionary fiscal policy is more likely to lead a short run increase in investment if the interest sensitivity of the investment is small and this is because the greater the sensitivity of investment to the interest, the more will be the decline in investment.

Therefore 'small' is the answer

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