The changes in investment, consumption, and GDP ( Gross domestic product ).

Question

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Answer 1

Question

Chapter 12, Problem 1P

To determine

The changes in investment, consumption, and GDP (Gross domestic product).

Expert Solution & Answer

Explanation of Solution

A decrease in the interest rate reduces the cost of borrowing, which in turn increases the level of investment. The increase in investment increases the employment, income, and output. Since the income increases, the purchasing power also increases, thereby increasing the consumption. Thus, the decreasing interest rate will increase the investment, consumption, and GDP.

Economics Concept Introduction

Investment: Investment refers to an act of purchasing financial assets anticipating a rise in the value of the assets.

Consumption: Consumption refers to the purchase of goods and services, in order to satisfy human needs.

GDP (Gross Domestic Product): GDP refers to the market value of all final goods and services produced in an economy during an accounting year.

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Answer 2

Question

Chapter 12, Problem 1P

To determine

The changes in investment, consumption, and GDP (Gross domestic product).

Expert Solution & Answer

Explanation of Solution

A decrease in the interest rate reduces the cost of borrowing, which in turn increases the level of investment. The increase in investment increases the employment, income, and output. Since the income increases, the purchasing power also increases, thereby increasing the consumption. Thus, the decreasing interest rate will increase the investment, consumption, and GDP.

Economics Concept Introduction

Investment: Investment refers to an act of purchasing financial assets anticipating a rise in the value of the assets.

Consumption: Consumption refers to the purchase of goods and services, in order to satisfy human needs.

GDP (Gross Domestic Product): GDP refers to the market value of all final goods and services produced in an economy during an accounting year.

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Answer 3

Question

Chapter 12, Problem 1P

To determine

The changes in investment, consumption, and GDP (Gross domestic product).

Expert Solution & Answer

Explanation of Solution

A decrease in the interest rate reduces the cost of borrowing, which in turn increases the level of investment. The increase in investment increases the employment, income, and output. Since the income increases, the purchasing power also increases, thereby increasing the consumption. Thus, the decreasing interest rate will increase the investment, consumption, and GDP.

Economics Concept Introduction

Investment: Investment refers to an act of purchasing financial assets anticipating a rise in the value of the assets.

Consumption: Consumption refers to the purchase of goods and services, in order to satisfy human needs.

GDP (Gross Domestic Product): GDP refers to the market value of all final goods and services produced in an economy during an accounting year.

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Answer 4

Question

Chapter 12, Problem 1P

To determine

The changes in investment, consumption, and GDP (Gross domestic product).

Expert Solution & Answer

Explanation of Solution

A decrease in the interest rate reduces the cost of borrowing, which in turn increases the level of investment. The increase in investment increases the employment, income, and output. Since the income increases, the purchasing power also increases, thereby increasing the consumption. Thus, the decreasing interest rate will increase the investment, consumption, and GDP.

Economics Concept Introduction

Investment: Investment refers to an act of purchasing financial assets anticipating a rise in the value of the assets.

Consumption: Consumption refers to the purchase of goods and services, in order to satisfy human needs.

GDP (Gross Domestic Product): GDP refers to the market value of all final goods and services produced in an economy during an accounting year.

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Answer 5

Chapter 12, Problem 1P

To determine

The changes in investment, consumption, and GDP (Gross domestic product).

Expert Solution & Answer

Explanation of Solution

A decrease in the interest rate reduces the cost of borrowing, which in turn increases the level of investment. The increase in investment increases the employment, income, and output. Since the income increases, the purchasing power also increases, thereby increasing the consumption. Thus, the decreasing interest rate will increase the investment, consumption, and GDP.

Economics Concept Introduction

Investment: Investment refers to an act of purchasing financial assets anticipating a rise in the value of the assets.

Consumption: Consumption refers to the purchase of goods and services, in order to satisfy human needs.

GDP (Gross Domestic Product): GDP refers to the market value of all final goods and services produced in an economy during an accounting year.

Answer 6

Chapter 12, Problem 1P

To determine

The changes in investment, consumption, and GDP (Gross domestic product).

Expert Solution & Answer

Explanation of Solution

A decrease in the interest rate reduces the cost of borrowing, which in turn increases the level of investment. The increase in investment increases the employment, income, and output. Since the income increases, the purchasing power also increases, thereby increasing the consumption. Thus, the decreasing interest rate will increase the investment, consumption, and GDP.

Economics Concept Introduction

Investment: Investment refers to an act of purchasing financial assets anticipating a rise in the value of the assets.

Consumption: Consumption refers to the purchase of goods and services, in order to satisfy human needs.

GDP (Gross Domestic Product): GDP refers to the market value of all final goods and services produced in an economy during an accounting year.

Answer 7

Chapter 12, Problem 1P

To determine

The changes in investment, consumption, and GDP (Gross domestic product).

Answer 8

Expert Solution & Answer

Explanation of Solution

A decrease in the interest rate reduces the cost of borrowing, which in turn increases the level of investment. The increase in investment increases the employment, income, and output. Since the income increases, the purchasing power also increases, thereby increasing the consumption. Thus, the decreasing interest rate will increase the investment, consumption, and GDP.