The changes in investment, consumption, and GDP (
Explanation of Solution
A decrease in the interest rate reduces the cost of borrowing, which in turn increases the level of investment. The increase in investment increases the employment, income, and output. Since the income increases, the
Investment: Investment refers to an act of purchasing financial assets anticipating a rise in the value of the assets.
Consumption: Consumption refers to the purchase of goods and services, in order to satisfy human needs.
GDP (Gross Domestic Product): GDP refers to the market value of all final goods and services produced in an economy during an accounting year.
Want to see more full solutions like this?
Chapter 12 Solutions
Principles of Macroeconomics (11th Edition)
- Principles of Economics (12th Edition)EconomicsISBN:9780134078779Author:Karl E. Case, Ray C. Fair, Sharon E. OsterPublisher:PEARSONEngineering Economy (17th Edition)EconomicsISBN:9780134870069Author:William G. Sullivan, Elin M. Wicks, C. Patrick KoellingPublisher:PEARSON
- Principles of Economics (MindTap Course List)EconomicsISBN:9781305585126Author:N. Gregory MankiwPublisher:Cengage LearningManagerial Economics: A Problem Solving ApproachEconomicsISBN:9781337106665Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike ShorPublisher:Cengage LearningManagerial Economics & Business Strategy (Mcgraw-...EconomicsISBN:9781259290619Author:Michael Baye, Jeff PrincePublisher:McGraw-Hill Education