Use the Figure Below to Answer the Following Question(s)

question 155

Multiple Choice

Use the figure below to answer the following question(s) .
Figure 10-7

-If the economy were operating at point a in Figure 10-8,the real rate of interest would tend to

• A)decrease and move the economy toward point c.
• B)decrease and move the economy toward point b.
• C)increase and move the economy toward point c.
• D)increase and move the economy toward point b.

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Definitions:

Completely Inelastic

A situation in which the demand or supply for a product does not change in response to changes in price.

Inelastic

Refers to a circumstance in which the demand or supply of a product or service is largely unaffected by price fluctuations.

Elastic

Describes a situation in which the demand or supply for a good or service significantly changes in response to price changes.

Cross-Price Elasticity

A measure of how much the demand for a product changes when the price of another product changes.