Exhibit 16-6 Money, Investment and Product Markets

Exhibit 16-6 Money, investment and product markets

In Exhibit 16-6, if the interest rate falls from i₁ to i₂, then:

A) the quantity demanded of investment increases from I₁ to I₂ and investment spending shifts the aggregate demand curve from AD₂ to AD₁, decreasing the level of real GDP.
B) the quantity demanded of investment increases from I₁ to I₂ and investment spending shifts the aggregate demand curve from AD₁ to AD₂, increasing the level of real GDP.
C) the quantity demanded of investment decreases from I₂ to I₁ and investment spending shifts the aggregate demand curve from AD₁ to AD₂, decreasing the level of real GDP.
D) the quantity demanded of investment decreases from I₂ to I₁ and investment spending shifts the aggregate demand curve from AD₂ to AD₁, increasing the level of real GDP.