In the short run, open-market purchases a. increase investment and real GDP, and decrease interest rates. b. increase real GDP a

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In the short run, open-market purchases a. increase investment and real GDP, and decrease interest rates. b. increase real GDP a

nd interest rates, and decrease investment. c. increase investment and interest rates, and decrease real GDP. d. decrease investment, interest rates, and real GDP.

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1 answer:

navik [9.2K] · Answer 1 · 2022-09-23T05:30:44+03:00

Answer: a. increase investment and real GDP, and decrease interest rates.

Explanation:

During an Open Market Purchase, the central bank of the country would be buying back securities from the public which means that it would be infusing money into the economic system.

With an increased amount of money in the economy, people will be able to save more which means that interests rate will drop because there are now more loanable funds. This drop in interest rates will encourage more companies and people to borrow cash for investment which will then lead to a higher GDP.