Suppose that with a real interest rate of 3%, no output gap exists in the economy. If the real interest rate is above 3%, the economic forecast predicts:
A)a positive output gap.
B)an inflationary output gap.
C)a negative output gap.
D)increased investment by managers.

Question

Quizplus · Accepted Answer

A real interest rate above 3% would likely lead to decreased borrowing and investment, slowing down economic activity and potentially leading to a negative output gap, where actual output is less than potential output.

Suppose That with a Real Interest Rate of 3%, No