In Some Sophisticated Macroeconomic Models, If Monetary Policy Is Used

question 11

Multiple Choice

In some sophisticated macroeconomic models, if monetary policy is used to combat recession, the real interest rate _____, whereas the real interest rate ______if fiscal policy is used.

• A)increases; decreases
• B)decreases; increases
• C)remains unchanged; increases
• D)decreases; remains unchanged

---

Definitions:

Fixed Costs

Costs that do not vary with the level of output or activity, such as rent, salaries, or loan payments.

Average Total Cost

The total cost of production divided by the number of units produced, representing the per-unit cost of production.

Total Cost Function

A mathematical representation of the total economic cost of production, which includes both fixed and variable costs, as a function of output level.

Fixed Cost

An expense that remains constant regardless of the volume of products or services produced or sold.