If the Interest Rate Increases, Then The

question 48

Multiple Choice

If the interest rate increases, then the:

• A) economy will move to a new point along the existing consumption function.
• B) consumption function will shift up.
• C) consumption function will shift down.
• D) investment demand curve will shift up.

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Definitions:

Welfare Economics

Normative evaluation of markets and economic policy.

Equilibrium

A state in which market supply and demand balance each other, resulting in stable prices and quantities.

Efficient

Refers to a level of performance that uses the least amount of inputs to achieve the highest amount of output.

Utility Possibilities Frontier

A curve that shows the maximum feasible amount of two goods that can be produced with available resources and technology, indicating the trade-offs and efficiency in production.