All other things being equal, which of the following situations is most likely t

Question

All other things being equal, which of the following situations is most likely to result in an economy facing a negative real interest rate?

a. The government increases purchases of final goods

b. Households become more concerned about job security.

c. New technology results in an increase in the marginal product of capital

d. Investors believe that the risks associated with investing in this economy have declined

The right answer is b and could you please tell me the reason and why the others are falseThanks!

Explanation / Answer

Ans

All other options will result in more investment and thus demand for investment rises. Hence interest rate will rise. But when B happened investment and Aggregate demand fall which will pull interest rate down

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