As the General Price Level in an Economy Rises, the Aggregate

question 1

Multiple Choice

As the general price level in an economy rises, the aggregate quantity demanded of goods and services falls because

• A) the prices of domestic goods have risen relative to foreign goods, causing exports to fall and imports to rise.
• B) higher interest rates caused by an increase in the demand for money balances causes a reduction in current investment and consumption.
• C) the value of money will fall, reducing the real wealth and, thus, the consumption of persons holding money balances.
• D) all of the above are correct.

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