A decrease in the interest rate, all other things unchanged, ________ the supply of an exhaustible natural resource and ________ the current price of the resource.

Question

Quizplus · Accepted Answer

A decrease in the interest rate may lead to a decrease in the cost of borrowing, which could encourage producers to invest in the exploration and extraction of exhaustible natural resources. This increase in the supply of the natural resource would result in a shift to the right in the supply curve, leading to a decrease in the current price of the resource. Therefore, the correct answer is C, which states that a decrease in the interest rate decreases the supply of an exhaustible natural resource and increases the current price of the resource.

A Decrease in the Interest Rate, All Other Things Unchanged