If the real interest rate falls, people decide to ________ ...

[formula1]

If the real interest rate falls, people decide to ________ because the opportunity cost of ________.
 
  A) decrease their consumption expenditure; consumption has decreased
  B) increase their consumption expenditure; consumption has decreased
  C) increase their consumption expenditure; saving has decreased
  D) save more; saving has decreased
  E) None of the above answers is correct.

Question 2

How does a cut in interest rates that increases investment affect the quantity of real GDP demanded, the aggregate demand curve, real GDP, and the price level?
 
  What will be an ideal response?

[rleezy04]

Answer to Question 1

B

Answer to Question 2

The increase in investment increases the aggregate quantity demanded and shifts the AD curve rightward. As a result, the equilibrium price level rises and the equilibrium real GDP increases.

[formula1]

Thanks for the timely response, appreciate it

[vickyvicksss]

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