A Temporary Decrease in Government Purchases Does Not Decrease the Real

question 25

Multiple Choice

A temporary decrease in government purchases does not decrease the real interest rate according to the market clearing model because:

• A)the supply of capital services and demand for capital services decrease about the same amount.
• B)neither demand for capital services nor supply of capital services shift due to the permanent increase in government purchases.
• C)the demand for capital services is downward sloping.
• D)the supply of capital services is upward sloping.

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Definitions:

Profit Margin

The ratio of a company's net income divided by its revenue, indicating how much profit the company makes for each dollar of sales.

Unbundling

The practice of separating out parts of a service or product to sell them individually, often used to offer more transparency and choice to customers.

Seasonal Discount

A price reduction offered on products or services during certain times of the year when demand is predictably lower or higher.

Underpricing

The practice of setting the price of a product or service lower than the market value or cost, often to attract customers or gain market share.