Why Does an Increase in the Price Level Cause a Decrease

question 208

Multiple Choice

Why does an increase in the price level cause a decrease in the aggregate quantity of goods and services demanded?

• A)because as wealth rises, interest rates rise, and the dollar appreciates
• B)because as wealth rises, interest rates fall, and the dollar depreciates
• C)because as wealth falls, interest rates rise, and the dollar appreciates
• D)because as wealth falls, interest rates fall, and the dollar depreciates

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Definitions:

U.S. Economy

The economic system of the United States, characterized by a mixed economy with a substantial private sector and strategic government interventions.

Real GDP

Gross Domestic Product adjusted for inflation, measuring the value of all goods and services produced within a country in a specific period, reflecting the actual output.

Aggregate Supply Curve

A graphical representation showing the relationship between the overall price level and the total output that producers in an economy are willing to produce at different price levels.

Interest Rate

The amount charged by a lender to a borrower for the use of assets, expressed as a percentage of the principal.