For this question,assume that investment spending depends only on output and no longer depends on the interest rate.Given this information,an increase in government spending

Question

Quizplus · Accepted Answer

An increase in government spending will lead to an increase in aggregate demand, which will in turn lead to an increase in output. As output increases, investment will also increase, as businesses will have more incentive to invest in new capital goods.

For This Question,assume That Investment Spending Depends Only on Output