QUESTION 19 Which of the following would you expect to increase the equilibrium interest rate? A....

QUESTION 19 Which of the following would you expect to increase the equilibrium interest rate? A. an increase in the percentage of income after net taxes that households save B. an increase in the budget deficit C. a decrease in the profitability of investment projects firms are considering D. a change from an income tax to a consumption tax 4 points

QUESTION 20 The period of expansion ends with a ________ and the period of recession ends with a ________. A. business cycle peak; business cycle trough B. business cycle trough; business cycle peak C. business cycle peak; business cycle peak D. business cycle trough; business cycle trough 4 points

Solutions

Expert Solution

Answer 19 - Option B

An increase in budget deficit

Increase in budget deficit will cause government to borrow more in order to pay the debt. This additional borrowing will be paid off through increased interest rates.

The other options will not increase the equlibrium interest rates.

20 - Option B

Business cycle trough , business cycle peak

Expansion ends with downfall which is shown by trough and recession ends with the rise in business shown by the peak in business cycle.

Rahul Sunny answered 1 year ago

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