What Causes Investments to Increase When the Production in the Economy

question 151

Multiple Choice

What causes investments to increase when the production in the economy is below full employment?

• A) When the economy is below full employment, the price level drops, resulting in a decrease in the demand for money and a decrease in interest rates.
• B) When the economy is below full employment, the price level rises, resulting in an increase in the demand for money and a decrease in interest rates.
• C) When the economy is below full employment, the price level drops, resulting in an increase in the demand for money and an increase in interest rates.
• D) When the economy is below full employment, the price level drops, resulting in a decrease in the demand for money and an increase in interest rates.

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Definitions:

Crowding Out

An economic situation where private investment decreases due to an increase in government borrowing and spending.

Household Spending

This refers to the total amount of money spent by households in an economy on goods and services over a particular period of time.

Net Exports

The value of a country's total exports minus its total imports, a crucial component of the gross domestic product.

Crowding Out

An economic phenomenon where increased government spending reduces private sector investment or consumption due to higher interest rates.