-In the Above Figure, If the Economy Is Initially at an Equilibrium

question 20

Multiple Choice

-In the above figure, if the economy is initially at an equilibrium output at point A and the interest rate is r₁, then an open market purchase of bonds by the Fed will

• A)cause interest rates to increase and output to decline.
• B)cause interest rates to decline to r₂, investment to increase to I₂, and the AD curve to shift upward to the right.
• C)cause interest rates to decline to r₂, investment to decline, and aggregate demand to shift inward to the left.
• D)not have any impact on short- or long-run equilibrium real Gross Domestic Product (GD

Analyze the effect of successive financial rates of return on an investment's value.

Understand the concept of compound interest and its applications in financial calculations.

Calculate the time it takes for an investment to grow to a certain amount under various compounding frequencies.

Analyze and compute the real rate of return on an investment, accounting for inflation.

---

Definitions:

North American

Refers to anything related to the continent that comprises the northern part of America, including Canada, the United States, Mexico, and Greenland.

Virginia Company

The Virginia Company was a joint-stock company chartered by King James I of England in the early 17th century with the purpose of establishing settlements on the coast of North America.

Headright System

A land grant policy that provided settlers a certain amount of land for each indentured servant they transported to America, primarily used in the colonial period.

Colony Development

The process of establishing and expanding colonies, often by a foreign power, leading to exploration, settlement, and economic exploitation of the colonized area.