When Interest Rates Fall in a Given Economy,it Causes Firms

question 55

Multiple Choice

When interest rates fall in a given economy,it causes firms to borrow __________ funds used for purchasing capital goods.The result will be a(n) ___________ in the level of capital employed in the economy.In terms of the production function (graphed with labor on the horizontal axis and Real GDP on the vertical axis) ,this then causes ____________________ which makes the LRAS curve shift ____________ resulting in ______________________.

• A) more; increase; the production function to shift upward; rightward; economic growth
• B) less; decrease; the production function to shift downward; leftward; a shrinking economy
• C) more; increase; a movement up along a given production function; rightward; economic growth
• D) more; increase; a movement down along a given production function; leftward; a shrinking economy

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Definitions:

Microeconomics

The branch of economics that studies the behavior of individuals and firms in making decisions regarding the allocation of limited resources.

Individual Households

Single units comprising one or more persons within an economy that make decisions about consumption, saving, and labor supply.

Inflation

The speed at which the overall price level for products and services increases, diminishing the buying power.

Unemployment

The situation where individuals who are capable of working and willing to work do not find employment.