A Rise in the Price Level Causes the Demand for Money

question 157

Multiple Choice

A rise in the price level causes the demand for money to ________ and the interest rate to ________,everything else held constant.

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

Analyze the impact of borrower and lender characteristics on interest rates.

Understand the distinction between economic resources and the role of money as it relates to interest.

Comprehend the reasons borrowers value money and the purposes for which they seek loans.

Understand the relationship between interest rates, investment decisions, and the demand for loanable funds.

---

Definitions:

Diminishing-Balance Method

A method of calculating depreciation of an asset, where the asset loses value at a fixed percentage rate every year over its useful life.

Straight-Line Depreciation

Straight-Line Depreciation is a method of allocating the cost of a tangible asset over its useful life in a linear fashion.

Taxable Income

Refers to the amount of an individual's or a corporation's income used to determine how much tax is owed to a government in a given tax year.

Canada Revenue Agency

The federal agency responsible for administering tax laws for the Canadian government and for most provinces and territories.