Increase in real gross domestic product demanded

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1. The interest rate effect tells us that a reduction in the price level causes people to convert cash for interest bearing assets. This behaviour causes a increase in the interest rate, which subsequently causes an increase in real gross domestic product demanded.

True or False

2. The negative movement from peak to trough of a business cycle is called an economic contraction because over this segment of the business cycle real GDP is larger than the previous period.

True or False

Reference no: EM13697560

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