Other Things Equal, If the Real Interest Rate Falls and Business

question 220

Multiple Choice

Other things equal, if the real interest rate falls and business taxes rise,

• A) investment will rise until it is equal to saving.
• B) we will be uncertain as to the resulting change in investment.
• C) we can be certain that investment will rise.
• D) we can be certain that investment will fall.

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Definitions:

Average Fixed Cost

The fixed expenses of a company divided by the number of units produced, showing cost per unit.

Average Variable Cost

Average variable cost is the total variable costs of production divided by the quantity of output produced; it changes with production volume.

Marginal Cost

The expenditure required to produce one more unit of a product or service.

Incremental Cost

The additional cost associated with producing one more unit of a product or service.