When interest rates in a given economy are reduced, it causes firms to employ __________ capital goods. In terms of the production function (graphed with labor on the horizontal axis and Real GDP on the vertical axis), this then causes ____________________
A) more; the production function to shift upward
B) less; the production function to shift downward
C) more; a movement up along a given production function
D) more; a movement down along a given production function
A
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Based on the graph showing the crowding-out effect, higher interest rates cause a shift from ______.
a. AD1 to AD2
b. AD2 to AD1
c. AD2 to AD3
d. AD1 to AD3
Refer to the graph shown. If the firm seeks to maximize profit, it should set a price equal to:
A. $10. B. $ 6. C. $ 4. D. $ 8.
Which of the following statements is TRUE about the interest rate effect?
A. Expenditures will change as a result of a change in the real value of money balances when there is a change in the price level. B. A higher price level lowers the interest rate, which causes business and consumers to increase their desired spending. C. The interest rate effect is why the aggregate demand curve is upward sloping. D. A lower price level lowers the interest rate, which causes businesses and consumers to increase their desired spending.
Market power may result from all of the following except
A. Patents and copyrights. B. Efficiencies of large-scale production. C. Control of resources. D. Low barriers to entry.