Consider the Long-Run Theory of Investment,saving,and Growth

question 54

Multiple Choice

Consider the long-run theory of investment,saving,and growth.For a given level of national income,a decrease in private consumption or government purchases will cause the equilibrium interest rate to

• A)increase and the flow of national saving to decrease.
• B)increase and the flow of investment to increase.
• C)increase and the flow of investment to decrease.
• D)decrease and the flow of national saving to increase.
• E)decrease and the flow of national saving to decrease.

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Definitions:

Long-Run Equilibrium

A state in which all factors of production and economic inputs can be fully adjusted, and all market forces are balanced.

Increase in Demand

A situation where the quantity of a good or service that consumers are willing and able to purchase at a particular price rises.

Marginal Revenue

The additional revenue that a firm gains when it sells one more unit of a product or service.

Average Total Cost

The total cost of production (fixed plus variable costs) divided by the number of units produced.