Which of the Following Best Describes the "Interest Rate Effect

question 262

Multiple Choice

Which of the following best describes the "interest rate effect"?

• A)An increase in the price level raises the interest rate and chokes off government spending.
• B)An increase in the price level lowers the interest rate and chokes off government spending.
• C)An increase in the price level raises the interest rate and chokes off investment and consumption spending.
• D)An increase in the price level lowers the interest rate and chokes off investment and consumption spending.

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