Which of the following leads to a decrease real GDP?
A)an increase in government spending
B)an increase in the inflation rate in other countries,relative to the inflation in the United States
C)an increase in interest rates
D)Households have increasingly optimistic expectations about future income.

Question

Quizplus · Accepted Answer

Increasing interest rates lead to a decrease in borrowing and investment, both of which can decrease real GDP.

Note: A, B, and D can all have different effects on real GDP depending on the context, so they cannot be the correct answer without further information.

Which of the Following Leads to a Decrease Real GDP