How does a cut in interest rates that increases investment affect the quantity of real GDP demanded, the aggregate demand curve, real GDP, and the price level?
What will be an ideal response?
The increase in investment increases the aggregate quantity demanded and shifts the AD curve rightward. As a result, the equilibrium price level rises and the equilibrium real GDP increases.
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Investments that are mistakenly made and generate losses
a. will occur when future revenues are known with certainty. b. indicate that the capital market is incapable of generating wealth. c. are normal costs of developing new projects and technologies in a world of uncertainty. d. will not occur when capital markets are operating efficiently.
Figure 8.4 depicts demand and costs for a monopolistically competitive firm. If the firm's demand curve shifts to the left as more firms enter the market:
A. the firm's profit will be smaller at the new profit-maximizing output level. B. the firm's profit will be greater at the new profit-maximizing output level. C. the firm's profit will remain the same at the new profit-maximizing output level. D. There is not sufficient information.
Higher prices lead to higher levels of real wealth.
Answer the following statement true (T) or false (F)
Output Q3 can be produced at the lowest cost by the size of firm represented by
A. ATC1.
B. ATC2.
C. ATC3.
D. ATC4.