Using Figure 2 Above, Suppose That the Economy Started at PAE2

question 112

Multiple Choice

Using Figure 2 above, suppose that the economy started at PAE2. A potential change that could cause the economy to go from PAE2 to PAE1 might be:

• A) wealth level increases.
• B) interest rates increase.
• C) taxes decrease.
• D) domestic income decreases.

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Definitions:

Investment Opportunities

Options available to investors looking to allocate resources in a way that generates a financial return.

Mutually Exclusive

Decisions or events that cannot occur at the same time, implying that the selection of one precludes the selection of another.

Pay Back

The time period required for an investment to generate cash flow sufficient to recover its initial cost.

Cash Flows

The total amount of money being transferred into and out of a business, especially considered as affecting liquidity.