The Wealth or Real Balances Effect Indicates That

question 119

Multiple Choice

The wealth or real balances effect indicates that

• A)a higher interest rate will increase the real value of many financial assets and therefore cause an increase is spending
• B)a higher interest rate will decrease the real value of many financial assets and therefore cause a decline in spending
• C)an increase in the price level will increase the demand for money,increase interest rates,and reduce consumption and increase spending
• D)a lower interest rate will increase the real value of many financial assets and therefore cause an increase in spending

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Definitions:

Ideological Argument

A type of argument that is based on a prescribed doctrine or set of beliefs, often political or philosophical.

Hypotheses

Tentative explanations or predictions that can be tested through further investigation and experimentation.

Comparative Reasoning

A method of reasoning by which one compares similarities and differences among objects, concepts, or scenarios.

Notoriously Weak

A description for something known widely and unfavorably for lacking strength, efficiency or quality.