According to the IS-MP-PC Model, a 1% Increase in the Policy

question 8

Multiple Choice

According to the IS-MP-PC model, a 1% increase in the policy interest rate leads to

• A)an upward shifts of the AD curve.
• B)no change in the AD curve.
• C)a downward shift in the AD curve.
• D)a downward shift in the AS curve.

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Definitions:

Total Fixed Costs

The sum of all costs that do not change with the level of output or sales, over a specific period.

Level of Activity

A measure of the volume or quantity of production or operations in a given period, often used in cost accounting to analyze costs.

Mixed Cost

An expense that contains both fixed and variable components, changing with the level of output but also incurred when there is no output.

Variable Costs

Costs that change in proportion to the level of production or sales activity, such as materials and labor directly involved in a company's product.