When drawn against the real interest rate, the output demand curve shifts to the right when
A)current total factor productivity z decreases.
B)future total factor productivity z' decreases.
C)future total factor productivity z' increases.
D)current total factor productivity z increases.
E)current and future total factor productivity z' decreases.

Question

Quizplus · Accepted Answer

When future total factor productivity (z') increases, the real interest rate is expected to be lower in the future. This makes investment in the present more attractive, leading to an increase in output demand and a rightward shift in the output demand curve.

When Drawn Against the Real Interest Rate, the Output Demand