The level of potential GDP
A) increases as the real rate of interest decreases.
B) increases as the real rate of interest increases.
C) is unaffected by the real rate of interest.
D) is represented on the IS-MP model by a horizontal line at the world real rate of interest.
C
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If the current allocation of resources in the market for hammers is inefficient, then it must be the case that
a. producer surplus exceeds consumer surplus in the market for hammers. b. consumer surplus exceeds producer surplus in the market for hammers. c. the sum of consumer surplus and producer surplus could be increased by moving to a different allocation of resources. d. the costs that sellers of hammers are incurring could be reduced by moving to a different allocation of resources.
If the absolute price elasticity of demand is 0.2, a 5 percent decrease in the price will cause
A) the quantity demanded to increase by 1 percent. B) the quantity demanded to increase by 10 percent. C) the quantity demanded to increase by 0.25 percent. D) the quantity demanded to increase by 2.5 percent.