Suppose a country institutes an investment tax credit, and this leads to an increase in investment spending
Question:
Suppose a country institutes an investment tax credit, and this leads to an increase in investment spending of $100 billion. Suppose the multiplier is 1.5 and the economy’s real GDP is $5,000 billion.
a. In which direction will the aggregate demand curve shift and by how much?
b. Explain using a graph why the change in real GDP is likely to be smaller than the shift in the aggregate demand curve. P-963
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Related Book For 
Principles Of Macroeconomics
ISBN: 9780691170817
1st Edition
Authors: Libby Rittenberg, Timothy Tregarthen
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