Which of the following statements is TRUE about the interest rate effect?
A) The interest rate effect is why the aggregate demand curve is upward sloping.
B) A lower price level lowers the interest rate, which causes businesses and consumers to increase their desired spending.
C) A higher price level lowers the interest rate, which causes business and consumers to increase their desired spending.
D) Expenditures will change as a result of a change in the real value of money balances when there is a change in the price level.
B
You might also like to view...
Factors of production are resources used in the consumption of goods and services
Indicate whether the statement is true or false
Water pollution from pulp and paper mills harms plants, animals, and humans. This is an example of
a. a market failure caused by an externality. b. a market failure caused by market power. c. a market failure caused by equality. d. There is no market failure in this case.
The main debate during the 1960s was
A) between Keynesians and classicals. B) between new Keynesians and new classicals. C) between Keynesians and monetarists. D) between new Keynesians and monetarists.
Suppose the economy's multiplier is 2. Other things equal, a $25 billion decrease in government expenditures on national defense will cause equilibrium GDP to:
A. decrease by $50 billion. B. decrease by $150 billion. C. remain unchanged since spending on military goods is unproductive and usually wasteful. D. decrease by $25 billion.