Conditions are expansionary fiscal policy to describe how the way to the short run increase in investment
1. Suppose government spending increases in a closed economy. Would the effect on aggregate demand be larger if the Bank of Canada took no action in response or if the Bank were committed to maintaining a fixed interest rate? Elucidate
2. In which of the following circumstances is expansionary fiscal policy more likely to lead to a short-run increase in investment? Elucidate?
1. Whenever investment accelerator is large or whenever it is small?
2. Whenever the interest sensitivity of investment is large or whenever it is small?
3. Whenever the marginal propensity to import is small or whenever it is large?