The Quantity of Aggregate Goods and Service Demanded Rises When

question 351

Multiple Choice

The quantity of aggregate goods and service demanded rises when the

• A)price level rises, because the interest rate rises.
• B)price level rises, because the interest rate falls.
• C)price level falls, because the interest rate rises.
• D)price level falls, because the interest rate falls.

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Definitions:

Rational

Describes a decision maker who chooses the available option that leads to the outcome he or she most prefers.

Diminishing Marginal Utility

The principle stating that as a person consumes more units of a good, the satisfaction (utility) gained from consuming each additional unit decreases.

Giffin Good

A type of good for which demand increases as the price increases, contradicting the basic law of demand due to the income effect.

Income Effect

The relationship between changing income levels in an economy or for individuals and the subsequent effect on goods and services demand.