Refer to the Information Provided in Figure 11

question 176

Multiple Choice

Refer to the information provided in Figure 11.5 below to answer the questions that follow. Figure 11.5
-Refer to Figure 11.5. As a result of an increase in the price level, the equilibrium interest rate ________ and the equilibrium output level ________.

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

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Definitions:

Equilibrium

A state of balance in a market or system where opposing forces cancel each other out and no changes occur over time.

Price Floor

A government- or body-imposed price control or limit on how low a price can be charged for a product.

Surplus

The situation in which the quantity supplied of a product exceeds the quantity demanded at the current price.

Law of Supply

A fundamental principle of economics that states that, all else equal, an increase in price results in an increase in the quantity supplied, and vice versa.