If Real GDP Falls and the Nominal Interest Rate Rises

question 18

Multiple Choice

If real GDP falls and the nominal interest rate rises, then the equilibrium price level

• A)must fall.
• B)must rise.
• C)will fall if the effect of the decline in real GDP dominates.
• D)will fall if the effect of the increase in the nominal interest rate dominates.

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Definitions:

Lord Dunmore

Lord Dunmore, also known as John Murray, was a British colonial governor who issued a proclamation in 1775 offering freedom to enslaved Africans who joined the British forces against the American revolutionaries.

Southerners

Refers to inhabitants of the Southern United States, historically associated with specific cultural, social, and economic traits.

Thomas Paine

An influential English-born writer and philosopher known for his works "Common Sense" and "The American Crisis," which advocated for American independence.