MACROECONOMICS (LL)
21st Edition
ISBN: 9781260186949
Author: McConnell
Publisher: MCG
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Chapter 6, Problem 7DQ
To determine
Impact of inventories on demand, output and production.
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Suppose the real interest rates in the United States and Switzerland are both 2%. Now suppose that the Federal Reserve in the United States conducts monetary policy that in turn raises domestic interest rates. Assume there are no policy changes in Switzerland and that their real interest rates stay steady at 2%.
Assume that consumption decreases, when interest rates increase. If there is a technological advance that leads to an increase in investment demand, then:
A. investment increases and the interest rate rises.
B. investment and the interest rate are both unchanged.
C. investment is unchanged and the interest rate rises.
D. investment decreases and the interest rate rises.
Other things the same, as the price level rises, the real value of a dollar
Answer
rises, and interest rates rise.
rises, and interest rates fall.
falls, and interest rates rise.
falls, and interest rates fall.
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