In an article regarding Bangladeshʹs economy, the author suggests that the government ...ʺ[g]ive double tax breaks on investment dollars. Give a tax break to R&D [research and development]. Give a tax break on donations to educational institutions.ʺ
The increase in investment is considered__________ and will generate a larger increase in __________.

Question

Quizplus · Accepted Answer

The suggested tax breaks are aimed at encouraging private investment, which is an example of autonomous expenditure as it is not influenced by changes in income or interest rates. This increase in investment is expected to generate a larger increase in induced expenditure, which is influenced by changes in income and is often subject to the multiplier effect. Therefore, option B is the correct answer. Option A is incorrect because induced expenditure refers to changes in expenditure that are influenced by changes in income, whereas autonomous expenditure is not influenced by changes in income. Option C is incorrect because the multiplier effect applies to induced expenditure, not autonomous expenditure. Option D is incorrect because equilibrium spending refers to the level of expenditure required for output to equal income, and is not directly relevant to this question.

In an Article Regarding Bangladeshʹs Economy, the Author Suggests That