
-In the above figure, if the economy is initially at point D and then the Reserve Bank lowers the cash rate,
A) the supply of loanable funds decreases, the real interest rate falls, and the AD curve shifts rightward.
B) other short- term interest rates fall, net exports increase, and the AD curve shifts rightward.
C) the demand for loanable funds and supply of loanable funds both increase by the same amount so that the AD curve shifts rightward.
D) the exchange rate rises, investment increases, and the SAS curve shifts rightward.
Correct Answer:
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