Which of the following leads to an increase real GDP?
A)a decrease in government spending
B)a decrease in the inflation rate in other countries, relative to the inflation in the United States
C)a decrease in interest rates
D)households have increasingly pessimistic expectations about future income
E)an increase in imports

Question

Quizplus · Accepted Answer

A decrease in interest rates typically leads to an increase in borrowing and investment, which ultimately increases real GDP.

Note: None of the other choices would directly lead to an increase in real GDP. A decrease in government spending, households having pessimistic expectations, and an increase in imports would all decrease aggregate demand and potentially decrease real GDP. A decrease in inflation rates in other countries relative to the US could potentially increase exports and net exports, but it's unclear without additional context.

Which of the Following Leads to an Increase Real GDP