Which of the following would cause investment spending to decrease and aggregate demand to shift left?
A)a decrease in the money supply and an investment tax credit.
B)the repeal of an investment tax credit and an increase in the money supply.
C)a decrease in the money supply and the repeal of an investment tax credit.
D)an investment tax credit and an increase in the money supply.

Question

Quizplus · Accepted Answer

A decrease in the money supply would cause interest rates to increase, making investment more expensive and therefore reducing investment spending. The repeal of an investment tax credit would also reduce investment spending. Both of these factors would shift aggregate demand to the left. The other choices either include an investment tax credit or an increase in the money supply, which would both serve to increase investment spending and shift aggregate demand to the right.

Which of the Following Would Cause Investment Spending to Decrease