Which of the following are true? a) Machines produced in an economy are intermediate goods, since they get used up in production of other goods. b) Investment in physical capital increases GDP of an economy. c) When interest rates are high, investment in physical capital decreases.

a, b and c a and b b and c c and a

b and c

Machines produced in an economy in a given year are not used up to produce other goods but yield their services over a number of years. Physical capital increases the productivity of goods and services, which helps the economy grow. Also higher interest rates reduce investment, because higher rates increase the cost of borrowing and require investment to have a higher rate of return to be profitable.