Refer to the Information Provided in Figure 23

question 272

Multiple Choice

Refer to the information provided in Figure 23.9 below to answer the question(s) that follow. Figure 23.9
-Refer to Figure 23.9. How will equilibrium aggregate expenditure and equilibrium aggregate output change as a result of a decrease in investment by $20 million?

• A) AE line shifts down, increasing equilibrium output and equilibrium expenditure.
• B) AE line shifts up, increasing equilibrium output and equilibrium expenditure.
• C) AE line shifts down, decreasing equilibrium output and equilibrium expenditure.
• D) AE line shifts down, increasing equilibrium output and decreasing equilibrium expenditure.

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Definitions:

Market Rate

The prevailing interest rate available in the marketplace for loans or investments, often used as a reference for setting the rates on loans.

Government Securities

Financial instruments issued by the government to finance its expenditures, offering a return in the form of interest payments to investors.

Bank Reserves

Bank reserves are the amount of cash that banks must hold either in their vaults or on deposit with a central bank, used to back deposits and ensure liquidity.

Money Supply

The sum of all financial assets that are readily available in an economy at a given moment, including cash on hand, deposits in banks, and other easily convertible assets.