Suppose it is an election year and the economy is in a recession. The opposition candidate proposes an investment tax credit to take effect next year after she takes office. If the public believes the opposition candidate has a good chance of winning, the effect of this promise will likely be to:
A)increase investment both this year and next year.
B)decrease investment both this year and next year.
C)increase investment this year and decrease it next year.
D)decrease investment this year and increase it next year.

Question

Quizplus · Accepted Answer

If the public believes the opposition candidate will win and implement the investment tax credit next year, firms may delay investment until the credit is available, decreasing investment this year and increasing it next year.

Suppose It Is an Election Year and the Economy Is