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:

Unavoidable Expenses

Expenses that cannot be eliminated and are necessary for a business's operations or living expenses.

Business Segment

A part of a company that can be identified by particular products or services or by geographical areas, generating its own revenue and expenses.

Net Loss

The amount by which a company's expenses exceed its revenues, indicating that the business has spent more than it has earned in a specific period.

Total Cost Method

An accounting method that includes all costs related to the production of goods when calculating inventory cost.