Exhibit 20-5 Money, Investment and product markets

-In Exhibit 20-5,if the interest rate falls from i₁ to i₂,investment spending will:

Question

Exhibit 20-5 Money, Investment and product markets
 
-In Exhibit 20-5,if the interest rate falls from i₁ to i₂,investment spending will:

Quizplus · Accepted Answer

According to the exhibit, when the interest rate falls, investment spending will increase (moving up along the Investment Function line). This will result in an increase in aggregate demand, shifting the AD curve to the right from AD₁ to AD₂. Therefore, option A is the correct choice.

Exhibit 20-5 Money, Investment and Product Markets