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A decrease in government spending initially and primarily shifts which curve in what direction?
A. aggregate demand right
B. aggregate demand left
C. aggregate supply right
D. aggregate supply left
Suppose that the investment demand curve in a certain economy is such that investment declines by $120 billion for every 1 percentage point increase in the real interest rate. Also, suppose that the investment demand curve shifts rightward by $150 billion at each real interest rate for every 1 percentage point increase in the expected rate of return from the investment. If stimulus spending (an expansionary fiscal policy) by the government increases the real interest rate by 2 percentage points, but also raises the expected rate of return on investment by 1 percentage point, how much investment, if any, will be crowded out?