In the figure given below panel A represents money market equilibrium, panel B represents investment demand, and panel C represents equilibrium real GDP. Figure 13.3 Refer to Figure 13.3.Other things equal, if the interest rate is greater than 6 percent, then:

Question

In the figure given below panel A represents money market equilibrium, panel B represents investment demand, and panel C represents equilibrium real GDP. Figure 13.3  Refer to Figure 13.3.Other things equal, if the interest rate is greater than 6 percent, then:

Quizplus · Accepted Answer

As per the given figure, at an interest rate greater than 6 percent, the investment demand curve intersects the money market equilibrium line at a point where the equilibrium level of real GDP is less than $500 billion. So, the equilibrium level of real GDP will decrease. Hence, option C is correct. Options A, D, and E are not relevant as they are not related to changes in interest rates or the given scenario. Option B is incorrect as an increase in the interest rate will lead to a decrease in the equilibrium level of real GDP, not an increase.

In the Figure Given Below Panel a Represents Money Market