Substitution Effects Help Explain the Slope of the Aggregate Demand

question 66

Multiple Choice

Substitution effects help explain the slope of the aggregate demand curve. One substitution effect refers to the

• A) inverse relationship between the interest rate and the price level.
• B) direct relationship between the interest rate and the real value of wealth.
• C) effect on investment expenditures that result from a change in interest rates produced by a change in the price level.
• D) change in wealth that results from a change in the interest rate.

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Definitions:

Inefficient

Describing a process or system that wastes resources or does not achieve its goals effectively.

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Disarmament Chamber

A facility or area designated for the dismantling or neutralization of military weapons and munitions.