Other Things Equal, an Improvement in the Expected Rate of Net

question 112

Multiple Choice

Other things equal, an improvement in the expected rate of net profit would:

• A) Reduce the price level and unemployment
• B) Decrease the interest rate and cause aggregate demand to increase
• C) Increase consumption and net exports, causing aggregate demand to shift rightwards
• D) Increase investment spending, real GDP, and the price level

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Definitions:

Mortgage-Backed Securities

Financial instruments that are secured by mortgages, with payments derived from the underlying loans.

Economic Efficiency

The optimal allocation of resources to maximize the production of goods and services without wasting any resources.

Competitive Forces

Pressures or influences that affect an organization's ability to compete in a market, including rivalry among existing competitors, the threat of new entrants, and bargaining power of customers and suppliers.

Market Allocation

A method of distributing goods and services among buyers and sellers wherein prices are determined by supply and demand forces in the market.