An increase in autonomous investment causes equilibrium output to _____ and the equilibrium interest rate to
A) rise, rise.
B) rise, fall.
C) fall, rise.
D) fall, fall.

Question

Quizplus · Accepted Answer

An increase in autonomous investment leads to an increase in aggregate demand, which in turn causes equilibrium output to rise. The increased demand for investment funds can lead to higher interest rates as the supply of funds is bid up.

An Increase in Autonomous Investment Causes Equilibrium Output to _____