The Real Interest Rate Should Be Inversely Related to Investment

question 56

Multiple Choice

The real interest rate should be inversely related to investment in:

• A) plant and equipment, home building, and inventories.
• B) plant and equipment and home building, but not inventories.
• C) plant and equipment and inventories, but not home building.
• D) inventories and home building, but not plant and equipment.

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Definitions:

Resource Allocation

The process of assigning and distributing available resources to various uses in an economy, often in order to maximize efficiency or achieve a desired outcome.

Production Possibilities Curve

A graph that shows the maximum number of possible units a company can produce if it only produces two types of goods given a fixed amount of resources.

Marginal Costs

The extra financial burden of manufacturing another unit of a product or service.

Marginal Benefits

The improvement in benefit or utility realized by consuming or producing one more unit of a good or service.