According to the Intertemporal Substitution Effect, a Fall in the Price

question 162

Multiple Choice

According to the intertemporal substitution effect, a fall in the price level will

• A) decrease the real value of wealth, which increases the quantity of real GDP demanded.
• B) increase the real value of wealth, which raises the interest rate so that the quantity of real GDP demanded decreases.
• C) increase net exports, which causes the quantity of real GDP demanded to increase.
• D) cause the interest rate to fall so that investment increases and the quantity of real GDP demanded increases.