Asked by Maxine Wiebenga on Apr 30, 2024
Verified
Changes in the equilibrium interest rate will:
A) affect both the size of the domestic output and the allocation of capital goods among industries.
B) affect the size of the domestic output,but not the allocation of capital goods among industries.
C) affect the allocation of capital goods among industries,but not the size of the domestic output.
D) have no perceptible effect on either the size of the domestic output or the allocation of capital goods among industries.
Equilibrium Interest Rate
The interest rate at which the demand for funds equals the supply of funds in the financial markets.
Allocation Of Capital
The process of distributing financial resources among different projects or sectors within an economy or organization to maximize returns.
- Interpret the consequences of adjustments in the equilibrium interest rate on the economic environment.
Verified Answer
PM
Prabh ManesMay 01, 2024
Final Answer :
A
Explanation :
Changes in the equilibrium interest rate will affect both the size of the domestic output and the allocation of capital goods among industries. A change in the interest rate can affect the borrowing costs for businesses, which can influence their investment decisions and ultimately impact the allocation of capital goods among industries. Additionally, changes in the interest rate can impact consumer spending and borrowing, which can influence the overall level of economic output.
Learning Objectives
- Interpret the consequences of adjustments in the equilibrium interest rate on the economic environment.