Question

A decrease in the interest rate would cause the

.

A.) aggregate expenditure line to shift upwards, decreasing equilibrium real GDP

B.) aggregate expenditure line to shift​ downward, decreasing equilibrium real GDP

C.) aggregate expenditure line to shift​ downward, increasing equilibrium real GDP

D.) aggregate expenditure line to shift​ upward, increasing equilibrium real GDP

.

Which of the following would shift the aggregate expenditure line upward?

A.) A decrease in government purchases

B.) A decrease in expected future income

C.) An increase in foreign real GDP

D.) An increase interest rates

Answer 1

D.) aggregate expenditure line to shift​ upward, increasing equilibrium real GDP

Assume, for instance, that the Federal Reserve System chooses to actualize expansionary money related approach. Dreading an approaching retreat on the business-cycle skyline, they choose to extend the cash supply with a relating decline in interest rates.

A decrease in interest rates can lure the business part to help venture expenditures. For instance, a 1 rate point interest rate decrease, (for example, from 10 percent to 9 percent) can lessen the absolute interest cost on a $10 million development advance by $300,000 over a five-year reimbursement period. This sparing will undoubtedly persuade a couple of firms to attempt additional speculation expenditures.