Suppose Firms Become More Optimistic About the Economy's Ability to Avoid

question 94

Multiple Choice

Suppose firms become more optimistic about the economy's ability to avoid a recession and hence the expected profit increases.As a result, the demand for loanable funds curve shifts ________ and the real interest rate ________.

• A) rightward; rises
• B) rightward; falls
• C) leftward; rises
• D) leftward; falls
• E) rightward; does not change

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Definitions:

Profit Maximization

The process or strategy aimed at achieving the highest possible profits within a business operation.

Economic Resources

Assets or inputs used for the production of goods and services, typically categorized into land, labor, capital, and entrepreneurship.

Marginal Product

Marginal product is the additional output generated by using one more unit of a particular input while keeping other inputs constant.

Marginal Revenue Product

The additional revenue generated from employing one more unit of a resource, all other factors being constant.