The Real-Balances Effect on Aggregate Demand Suggests That a

question 248

Multiple Choice

The real-balances effect on aggregate demand suggests that a

• A) lower price level will decrease the demand for money, decrease interest rates, and increase consumption and investment spending.
• B) lower price level will decrease the real value of many financial assets and therefore cause an increase in spending.
• C) lower price level will increase the real value of many financial assets and therefore cause an increase in spending.
• D) higher price level will increase the real value of many financial assets and therefore cause an increase in spending.

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