At Higher Rates of Interest

question 7

Multiple Choice

At higher rates of interest

• A) households save less and businesses invest more.
• B) households save less and businesses invest less.
• C) households save more and businesses invest less.
• D) households save more and businesses invest more.

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Definitions:

External Costs

Costs that affect parties who do not directly participate in an economic transaction, often not reflected in market prices (e.g., pollution).

Tax

A required financial imposition or alternative type of assessment placed on taxpayers by government entities to support government budgeting and assorted public outlays.

Efficient Level

Refers to the state where resources are allocated in a way that maximizes the net benefit to society, often achieved when marginal cost equals marginal benefit.

Competitive Output

The level of production that firms in a perfectly competitive market produce and sell at the market price, where marginal cost equals marginal revenue.