Refer to the information provided in Figure 11.5 below to answer the questions that follow. Figure 11.5
-Refer to Figure 11.5. As a result of an increase in government spending, the equilibrium interest rate ________ and the equilibrium output level ________.
A) increases; increases
B) increases; decreases
C) decreases; increases
D) decreases; decreases

Question

Refer to the information provided in Figure 11.5 below to answer the questions that follow.  Figure 11.5
-Refer to Figure 11.5. As a result of an increase in government spending, the equilibrium interest rate ________ and the equilibrium output level ________.
A) increases; increases 
B) increases; decreases 
C) decreases; increases 
D) decreases; decreases

Quizplus · Accepted Answer

An increase in government spending would shift the AD curve to the right, increasing equilibrium output level. The increased demand for funds would push up interest rates, resulting in an increase in equilibrium interest rate.

Refer to the Information Provided in Figure 11