If output falls, which of the following could be an explanation?
A) a fall in the interest rate
B) a fall in foreign income or a rise in investments
C) a decline in government spending
D) a rise in the interest rate, a fall in foreign income, or a decline in government spending

Question

Quizplus · Accepted Answer

A fall in output can be caused by factors that reduce aggregate demand or aggregate supply. A rise in the interest rate can decrease investment spending, a fall in foreign income can reduce export demand, and a decline in government spending directly reduces aggregate demand. Choices A and B generally would increase output, and C is included in the broader set of conditions described in D.

If Output Falls, Which of the Following Could Be an Explanation