Question

Consider the AD/AS framework seen in lectures. Say that, given the recent data on jobs added to the economy, firms feel confident that the economy will improve, and as a result investment in the economy increases. Compared to the initial equilibrium, in the long run equilibrium Prices fall, the nominal interest rate rises. None of the other answers. Prices rise, the nominal interest rate falls. Prices and the nominal interest rate fall. Prices and the nominal interest rate rise.

Answer 1

Answer:

Price fall , the nominal interest rate rises.

Explanation:

Since in the short run, the effect of these investment is that price level increase and nominal interest fall due to increase in the money supply and there is a increase in the real output but when the economy self correct in long run, the price level will fall and nominal interest rate rises to its original equilibrium level.