The Pigou Effect Is One of the Reasons That the Aggregate

question 29

Multiple Choice

The Pigou effect is one of the reasons that the aggregate demand curve slopes downward. According to this argument, when the price level

• A)goes down, interest rates will fall resulting in an increase in the total level of spending.
• B)goes down, peoples' savings are able to purchase more stuff so the total level of spending increases.
• C)goes down, peoples' savings are able to purchase more stuff, but spending tends to stay steady, while savings increase.
• D)in the United States goes down, US goods and services become relatively cheaper compared to things produced overseas, so the total level of spending on US goods and services increases.

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