Which of the Following Correctly Describes the Interest-Rate Effect

question 8

Multiple Choice

Which of the following correctly describes the interest-rate effect?

• A) If the price level decreases, consumer purchasing power decreases, the demand for credit rises, interest rates rise, debt-financed borrowing decreases, and real GDP demanded falls.
• B) If the price level decreases, consumer purchasing power increases, the demand for credit rises, interest rates rise, debt-financed borrowing decreases, and real GDP demanded falls.
• C) If the price level decreases, consumer purchasing power increases, the demand for credit falls, interest rates rise, debt-financed borrowing decreases, and real GDP demanded falls.
• D) If the price level decreases, consumer purchasing power increases, the demand for credit falls, interest rates fall, debt-financed borrowing increases, and real GDP demanded increases.

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Definitions:

Global Society

Global society refers to an interconnected world where nations, peoples, and cultures are linked through the global economy, communications technology, and environmental challenges that transcend national boundaries.

Accelerating Pace

Describes the increasing speed at which changes, developments, or activities are occurring, often seen in technology, business, and society.

Interconnected System

A complex configuration in which components or entities are linked together so that each part affects or is affected by others.

Negatively Associated

Connected in such a way that one may adversely influence the perception of another.