When drawn against the real interest rate,the output demand curve shifts to the right when
A) current capital stock decreases.
B) current capital stock increases.
C) real wage rate decreases.
D) real wage rate increases.
E) current capital stock and real wage rate increases,

Question

Quizplus · Accepted Answer

When the current capital stock decreases, it reduces the economy's capacity to produce goods and services, thus raising the demand for investment in new capital. This leads to a shift in the output demand curve to the right. Changes in real wage rates do not directly affect the output demand curve, as they primarily impact the labor supply and demand and the cost of production. The joint effect of changes in both capital and labor inputs (i.e., current capital stock and real wage rate) may affect the slope of the output demand curve, but this is not reflected in the options provided.

When Drawn Against the Real Interest Rate,the Output Demand Curve