An Increase in the Real Interest Rate Causes

question 4

Multiple Choice

An increase in the real interest rate causes

• A) the IS curve to shift to the right.
• B) the IS curve to shift to the left.
• C) a movement up the IS curve.
• D) a movement down the IS curve.

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Definitions:

Risk-Return Tradeoff

The principle that potential return on investment increases with the degree of risk.

Capital Investment Analysis

Process of comparing the costs and benefits of a long-term asset investment.

Leveraged Buyout

Acquiring a company using a significant amount of borrowed money (leverage) to meet the cost of acquisition, often using the assets of the company being acquired as collateral.

Trade Credit

A financial arrangement where a buyer is allowed to purchase goods or services and pay the supplier at a later date.