When the Price Level Falls

question 62

Multiple Choice

When the price level falls

• A)households want to lend less.
• B)the interest rate rises.
• C)firms want to spend less on investment goods.
• D)None of the above are correct.

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Definitions:

Output Effect

A phenomenon where changes in price level influence the quantity of goods and services produced in an economy due to the alteration in profitability of goods sold.

Price Effect

The impact on consumer demand or supply of goods due to changes in the price of those goods or related goods.

Free Trade

An economic policy that allows imports and exports between countries with minimal or no tariffs, quotas, or prohibitions.

Oligopoly

A market structure characterized by a small number of firms whose decisions affect and are affected by each other.