Question

1. When there is a decrease in the interest rate you can expect to see

Increase in investment

Decrease in Spending

Increase in savings

Both increase in investment and increase in savings

If an economy develops a technology to produce all goods and services more efficiently ( ie. The internet)

We would move up the short run aggregate supply curve

We would move down the short run aggregate supply curve

The long run aggregate supply curve would shift left

The long run aggregate supply curve would shift right

Answer 1

1.

When the interest rate decreases the investment increases in the economy due to lower borrowing cost. This is because at lower interest rate borrowing cost decreases, so the cost of production also increases and therefore the profitability of the firm also increases.

Hence Aggregate demand increases.

Hence option first is the correct answer.

2.

If an economy develops a technology to produce all goods and services more efficiently the productivity will increase. Hence in the long-run production potential will increase of the firm.

Hence the long-run aggregate supply curve shifts rightward.

Hence option fourth is the correct answer.