Which of the Following Is a Reason Why Increases in the Price

question 102

Multiple Choice

Which of the following is a reason why increases in the price level result in a decline in aggregate expenditure?

• A)Price level increases raise real wealth, which causes consumption spending and aggregate expenditure to decline.
• B)Price level increases cause firms and consumers to hold more money, which raises the interest rate, ceteris paribus. Higher interest rates lower consumption and planned investment expenditures, which lowers aggregate expenditure.
• C)Price level increases in Australia relative to other countries raise net exports, which lowers aggregate expenditure.
• D)As the price level rises, government spending falls, which lowers aggregate expenditure.