Expansionary Fiscal Policy Can Be Successful Without a Negative Impact

Multiple Choice

Expansionary fiscal policy can be successful without a negative impact on the level of investment if

A) the government spending increase is financed by a tax increase
B) the Fed undertakes open market sales at the same time
C) it is implemented via an investment subsidy rather than a cut in personal income taxes
D) money demand is completely interest inelastic
E) it is implemented through a cut in personal income taxes rather than an increase in government purchases