Suppose a country repeals an investment tax credit, and this leads to a decrease in investment spending

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Suppose a country repeals an investment tax credit, and this leads to a decrease 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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Principles Of Macroeconomics

ISBN: 9780691170817

1st Edition

Authors: Libby Rittenberg, Timothy Tregarthen

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Question Posted: Nov 08, 2024 08:00 AM

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Suppose a country repeals an investment tax credit, and this leads to a decrease in investment spending

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Principles Of Macroeconomics

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