In the Context of Aggregate Demand, the Interest Rate Effect

question 2

Multiple Choice

In the context of aggregate demand, the interest rate effect means that a decrease in the average price level will lead to _____ in interest rates and _____ in investment spending.

• A) an increase; a decrease
• B) an increase; an increase
• C) a decrease; a decrease
• D) a decrease; an increase

---

Definitions:

Legally Binding

A contract or agreement that is enforceable by law, meaning parties must fulfill their obligations or risk legal action.

Grievance Procedures

Formal steps followed by an organization to address complaints or disputes raised by employees regarding workplace conditions or treatment.

Bargaining Centralization

The degree to which negotiations and decision-making in labor relations are conducted at a single, comprehensive level, often involving multiple employers and unions.

Whipsawing

A tactic used in collective bargaining where a union negotiates with multiple employers one at a time, using the gains from the first negotiation as leverage in the following ones.