A Rise in the Price Level

question 23

Multiple Choice

A rise in the price level

• A)decreases aggregate expenditure and produces a movement along the aggregate demand curve.
• B)decreases aggregate expenditure and produces a rightward shift of the aggregate demand curve.
• C)decreases aggregate expenditure and produces a leftward shift of the aggregate demand curve.
• D)has no effect on aggregate expenditure.
• E)increases aggregate expenditure, but has no effect on the aggregate demand curve.

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Definitions:

Capital Goods

Long-term physical assets used in the production of goods or services, such as machinery and buildings.

Current Consumption

The total amount of goods and services consumed at the present time, as opposed to savings for future consumption.

Time Preference

The inclination of individuals to prefer goods and services sooner rather than later.

Rational Expectations

The hypothesis that individuals form predictions of the future based on available information and act on those predictions rationally.