When the Excess Capacity of Business Rises, Aggregate

question 99

Multiple Choice

When the excess capacity of business rises, aggregate:

• A)demand increases.
• B)demand decreases.
• C)supply increases.
• D)supply decreases.

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Definitions:

Real Interest Rates

This is the interest rate after inflation adjustment, demonstrating the true cost of loans or the actual gains from savings accounts.

Nominal Interest Rates

The interest rates before adjustments for inflation, indicating the gross return on financial investments or loans.

Inflation

The rate of increase in the general price index for goods and services, leading to a decrease in how much can be bought.

Purchasing Power

The amount of goods or services one can obtain with a single unit of currency, determining its value.