If the Price Level Falls, Then

question 3

Multiple Choice

If the price level falls, then

• A)the interest rate falls and spending on goods and services falls.
• B)the interest rate falls and spending on goods and services rises.
• C)the interest rate rises and spending on goods and services falls.
• D)the interest rate rises and spending on goods and services rises.

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Definitions:

Average Product

A metric that measures output per unit of a variable input, calculated by dividing total production by the quantity of the variable input.

Diminishing Marginal Returns

A principle stating that as additional units of a variable input are added to a fixed input, the additional output produced from each new unit decreases beyond a certain point.

Diminishing Marginal Returns

A principle stating that as investment in a particular area increases, the rate of profit from that investment, after a certain point, cannot increase forever and will eventually decrease.

Marginal Product

The additional output that is produced by adding one more unit of a certain input while holding other inputs constant.