A decrease in the cash rate a. decreases the demand for loanable funds, lowers the real interest rate, and decreases aggregate demand. b. lowers the exchange rate, increases the supply of loanable funds, and increases aggregate demand. c. lowers other short-term interest rates, raises the real interest rate, and increases aggregate demand. d. increases other short-term interest rates, decreases investment, and decreases aggregate demand

Economics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN:9781305506725
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Chapter27: Investment, The Capital Market, And The Wealth Of Nations
Section: Chapter Questions
Problem 11CQ
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A decrease in the cash rate

a. decreases the demand for loanable funds, lowers the real interest rate, and decreases aggregate demand.

b. lowers the exchange rate, increases the supply of loanable funds, and increases aggregate demand.

c. lowers other short-term interest rates, raises the real interest rate, and increases aggregate demand.

d. increases other short-term interest rates, decreases investment, and decreases aggregate demand.

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