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

question 242

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. Higher interest rates lower consumption and planned investment expenditures, which lowers aggregate expenditure.
• C)Price level increases in Canada relative to other countries raise net exports, which lowers aggregate expenditure.
• D)As the price level rises, government spending falls, which lowers aggregate expenditure.
• E)As the price level rises, real interest rates fall making consumers feel less wealthy.

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