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:

Hypothesis

A proposed explanation for a phenomenon, made as a starting point for further investigation, testing, or experimentation.

Informative

Providing useful or important information or details.

Assumptions

Statements or ideas accepted as true without proof, used as the basis for reasoning or argumentation.

Explanandum

The phenomenon or event that is to be explained, often used in the context of scientific inquiry.