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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Definitions:

Amphetamines

A group of stimulant drugs that increase activity in the brain and body, often used to treat ADHD and narcolepsy.

Stimulants

Substances that increase activity in the central nervous system or the sympathetic nervous system, heightening alertness, attention, and energy.

Barbiturates

A class of drugs that act as central nervous system depressants, often used for their sedative, hypnotic, and anticonvulsant properties.

Cocaine

A powerful stimulant drug derived from the leaves of the coca plant, often used illegally for its euphoric effects.