A Rise in the Price Level Changes Aggregate Demand Because

question 203

Multiple Choice

A rise in the price level changes aggregate demand because

• A) the real value of people's wealth decreases and so they decrease their consumption.
• B) the real value of people's wealth varies directly with the price level and so does their spending.
• C) people like to spend more when prices are higher.
• D) the more money people have, the more it is worth and hence the more goods and services they demand.

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Definitions:

Self-Liquidating Loans

Loans that are structured to be paid off through the cash flow generated by the project or asset they finance.

Interest Rates

The percentage of a sum of money charged for its use, indicating the cost of borrowing money or the return on invested savings.

Net Working Capital

A financial metric that measures a company's ability to pay off its current liabilities with its current assets.

Current Liabilities

Short-term financial obligations due within one year, typically including accounts payable, short-term loans, and accrued expenses.