3. Suppose local governments throughout the United States increase their

tax on business inventories. What would you expect to happen to U.S.

investment? Why?

4. Suppose the government announces it will pay for half of any new

investment undertaken by firms. How will this affect the investment

demand curve?

5. White House officials often exude more confidence than they actually

feel about future prospects for the economy. Why might this be a good

strategy? Are there any dangers inherent in it?