The level of full employment output
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-LM-FE diagram by a horizontal line at the world real rate of interest.

Question

Quizplus · Accepted Answer

The level of full employment output is determined by factors such as capital stock, labor force, and technology, and is not affected by the real rate of interest. Therefore, this level remains constant regardless of changes in the real interest rate.

The Level of Full Employment Output