$$\begin{array} { | c | c | c | c | c | c | c | }
\hline \text { Price Level } & C & I _ { g } & G & X & M & \text { Real GDP } \
\hline 128 & \$ 18 & \$ 2 & \$ 3 & \$ 1 & \$ 5 & \
\hline 125 & 20 & 4 & 3 & 2 & 4 & \
\hline 122 & 22 & 6 & 3 & 3 & 3 & \
\hline 119 & 24 & 8 & 3 & 4 & 2 & \
\hline 116 & 26 & 10 & 3 & 5 & 1 & \
\hline
\end{array}$$ In the accompanying table for a particular country, C is consumption expenditures, $$I _ { g }$$ is gross
Investment expenditures, G is government expenditures, X is exports, and M is imports. All ?gures
Are in billions of dollars. A decrease in the interest rate not caused by a change in the price level
Would
A) increase the values in column $$I _ { g }$$ and increase aggregate demand.
B) decrease the values in column $$I _ { g }$$ and increase aggregate demand.
C) increase the values in column C and decrease aggregate demand.
D) decrease the values in column C and decrease aggregate demand.

Question

$$\begin{array} { | c | c | c | c | c | c | c | } 
\hline \text { Price Level } & C & I _ { g } & G & X & M & \text { Real GDP } \
\hline 128 & \$ 18 & \$ 2 & \$ 3 & \$ 1 & \$ 5 & \
\hline 125 & 20 & 4 & 3 & 2 & 4 & \
\hline 122 & 22 & 6 & 3 & 3 & 3 & \
\hline 119 & 24 & 8 & 3 & 4 & 2 & \
\hline 116 & 26 & 10 & 3 & 5 & 1 & \
\hline
\end{array}$$ In the accompanying table for a particular country, C is consumption expenditures, $$I _ { g }$$ is gross
Investment expenditures, G is government expenditures, X is exports, and M is imports. All ?gures
Are in billions of dollars. A decrease in the interest rate not caused by a change in the price level
Would
A) increase the values in column $$I _ { g }$$ and increase aggregate demand.
B) decrease the values in column $$I _ { g }$$ and increase aggregate demand.
C) increase the values in column C and decrease aggregate demand.
D) decrease the values in column C and decrease aggregate demand.

Quizplus · Accepted Answer

A decrease in the interest rate would lead to a decrease in the cost of borrowing, which would incentivize businesses to take out more loans to finance investment projects (as indicated by an increase in column $$I _ { g }$$). This increase in investment expenditures would increase aggregate demand.

In the Accompanying Table for a Particular Country, C Is