The output demand curve shows the
A)positive relationship between total factor productivity and current aggregate output.
B)positive relationship between the real interest rate and current aggregate output.
C)negative relationship between the real interest rate and current aggregate output.
D)negative relationship between the wage rate and current aggregate output.
E)positive relationship between the wage rate and current aggregate output.

Question

Quizplus · Accepted Answer

The output demand curve shows the relationship between the real interest rate and current aggregate output, where there is a negative relationship between the two variables. This is because when the real interest rate is high, it leads to higher borrowing costs for firms and consumers, which reduces their spending and investment, leading to a decrease in aggregate output. On the other hand, when the real interest rate is low, it stimulates spending and investment, leading to a higher level of aggregate output.

The Output Demand Curve Shows the