According to Keynes, When the Price Level Rises, It Causes

question 4

Multiple Choice

According to Keynes, when the price level rises, it causes the interest rate to do what? It causes the level of business spending to do what?

• A)It causes an increase in the interest rate, due to a greater consumer demand for money to spend; business spending decreases.
• B)It causes an increase in the interest rate, due to greater consumer demand for money to spend; business spending goes up as well.
• C)It causes a decrease in the interest rate, as people adjust to higher prices and purchase less; business spending decreases as well.
• D)It causes a decrease in the interest rate, as people adjust to higher prices and purchase less; business spending goes up.

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Definitions:

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