If the Money Supply Is Fixed,increases in the Price Level

question 63

Multiple Choice

If the money supply is fixed,increases in the price level

• A) raise the purchasing power of the money supply and increase the amount people spend.
• B) reduce the average money cost of each transaction, thus lowering total spending.
• C) reduce interest rates; thus, the cost of borrowing money falls, leading to more consumption and investment.
• D) raise the incentive for people to spend on big-ticket items such as appliances, automobiles, and houses.
• E) increase the size of the money balances people want in order to maintain the real value of their purchases, thus causing interest rates to rise.