Holding all other things constant, when the price level rises, interest rates:
a. rise and firms want to borrow more for new plants and equipment and households want to borrow less for homebuilding.
b. rise and firms will want to borrow less for new plants and equipment and households will want to borrow less for homebuilding.
c. fall and firms want to borrow more for new plants and equipment and households want to borrow more for homebuilding.
d. all of the above
Question 2
Assume that an economy is in equilibrium with a budget deficit of 130 billion, positive net exports of 453 billion, and savings equal to 1,550 billion. If taxes are zero, then planned investment spending must be equal to:
a. 1,550 billion.
b. 130 billion.
c. 1,873 billion.
d. 1,227 billion.
e. 967 billion.
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