Considering only the goods and forex markets, as the economy adjusts to lower rates of interest and equilibrium is restored, the level of GDP will:
A) fall.
B) rise.
C) become unstable.
D) decline very gradually.

Question

Quizplus · Accepted Answer

Lower interest rates stimulate spending and borrowing, which in turn boosts consumption and investment. This leads to an overall increase in GDP as demand for goods and services rises. Therefore, as equilibrium is restored due to lower interest rates, the level of GDP is likely to rise rather than fall.

Considering Only the Goods and Forex Markets, as the Economy