Ask Question
BusinessBusiness
20 April, 15:11

When government expenditures increase, the interest rate

a. decreases, making the change in aggregate demand smaller.

b. increases, making the change in aggregate demand larger.

c. decreases, making the change in aggregate demand larger.

d. increases, making the change in aggregate demand smaller

+4
Answers (1)
  1. 20 April, 15:26
    0
    The correct answer is option d.

    Explanation:

    When there is an increase in the government expenditures, the income in the economy will increase. As a result, the demand will increase. The increase in demand will increase the price level.

    The suppliers will produce more. To increase output more capital investment will be required. This will further cause an increase in the demand of loan-able funds. So, the interest rate will increase as well.

    With the increase in interest rates, the cost of borrowing will increase. This will lead to lesser capital investment and as a result the aggregate demand will be smaller, because of lower production and thus lower income.
Know the Answer?
Not Sure About the Answer?
Find an answer to your question 👍 “When government expenditures increase, the interest rate a. decreases, making the change in aggregate demand smaller. b. increases, making ...” in 📗 Business if the answers seem to be not correct or there’s no answer. Try a smart search to find answers to similar questions.
Search for Other Answers
You Might be Interested in
Ariel has two children, christopher and pat. christopher is 25 years old and pat is 22. both are full time students at southern college, have full tuition scholarships, and live at school during the year. christopher graduated in june.
Answers (1)
Match each of the following contract principles to the statement that best fits it: A. bargained-for exchange of value to the parties B. the subject matter of the contract does not violate law or public policy C.
Answers (1)
Kalanja Designs, which produces earrings, is developing direct material standards. Each earring requires 0.52 kilograms of a special metal. The allowance for waste is 0.03 kilograms per earring, while the allowance for rejects is 0.
Answers (1)
What might you do if you are unable to get a credit card? A. Make as many cash purchases as possible B. Apply for a department store card C. Stop accepting government assistance D. Pay less attention to your bank balance
Answers (1)
Donald and Charlene are married and do not have any children. They plan to ensure that the other will not be unduly burdened by debts in case one of them dies. Each plans to continue to work after the other one dies.
Answers (1)
New Questions in Business
What do bankers take into account when allocating their assets?
Answers (1)
Don't panic if you get lost. never leave camp without fire-starting equipment. always bring a map and compass. always tell someone where you are going. these are: rules of firearms safety
Answers (1)
The situation in which one supplier thoroughly dominates a market and essentially shuts out other competitors
Answers (1)
Under what scenarios could a foodservice operation achieve excellent food and beverage cost percentages, yet incur excessively high labor costs?
Answers (1)
Stuart Weddle's father is 55 years old and wants to set up a cash flow stream that would be forever. He would like to receive $15,000 every year, beginning at the end of this year.
Answers (2)
Home » Business » When government expenditures increase, the interest rate a. decreases, making the change in aggregate demand smaller. b. increases, making the change in aggregate demand larger. c. decreases, making the change in aggregate demand larger. d.
Sign Up Forgot Password?