When Drawn Against the Real Interest Rate, the Output Supply

question 43

Multiple Choice

When drawn against the real interest rate, the output supply curve unambiguously shifts to the right if either or both of the following occur.

• A)an increase in current government spending and a decrease in future government spending
• B)a decrease in current government spending and an increase in the real interest rate
• C)a decrease in current government spending and a decrease in future government spending
• D)an increase in current government spending and an increase in future government spending
• E)a decrease in current government spending and an increase in future government spending

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Definitions:

Yield to Maturity

The total return expected on a bond if held until it matures, considering both interest payments and the capital gain or loss.

Bonds

Long-term notes that are bought and sold on the open market, much like stocks.

Commission

A payment made to an individual or business for facilitating a sale or service, typically calculated as a percentage of the transaction value.

Current Yield

The annual income (interest or dividends) divided by the current price of the security.