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Author Question: If the real interest rate falls, people decide to ________ because the opportunity cost of ________. ... (Read 75 times)

formula1

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on: Jun 29, 2018
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?


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rleezy04

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Reply #1 on: Jun 29, 2018
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

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Reply 2 on: Jun 29, 2018
Gracias!

Liddy

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Reply 3 on: Yesterday
Thanks for the timely response, appreciate it

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