How does a decrease in government budget deficits affect the equilibrium interest rate in the loanable funds model?
A) Interest rate increases.
B) Interest rate decreases.
C) Interest rate stays the same.
D) Interest rate first increases and then decreases back to the original level.
B
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In the Mundell-Fleming model with perfect capital mobility, the domestic interest rates are determined by
a. monetary policy. b. the IS and LM curves. c. domestic savings and investment. d. budget deficits. e. none of the above.
Using a TR-TC graph, a firm maximizes profit by producing the output level where the greatest
a. vertical distance occurs between the MR and MC curves b. vertical distance occurs between the TR and TC curves, and the TR curve is above the TC curve c. total revenue occurs d. horizontal distance occurs between the TR and TC curves, and the TR curve is above the TC curve e. horizontal distance occurs between the MR and MC curves, and the MR curve is rising