The Interest-Rate Effect Suggests That

question 305

Multiple Choice

The interest-rate effect suggests that

• A) a decrease in the supply of money will increase interest rates and reduce interest-sensitive consumption and investment spending.
• B) an increase in the price level will increase the demand for money, reduce interest rates, and decrease consumption and investment spending.
• C) an increase in the price level will increase the demand for money, increase interest rates, and decrease consumption and investment spending.
• D) an increase in the price level will decrease the demand for money, reduce interest rates, and increase consumption and investment spending.

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Definitions:

Classical Conditioning

A learning process through which an association is formed between two stimuli, leading to a learned response to a previously neutral stimulus.

Observational Learning

A method where people alter their behavior or learn new facts through the observation of others' activities.

Systematic Desensitization

A therapy method used to reduce phobic reactions or anxiety towards a particular stimulus by gradually exposing the subject to it while in a relaxed state.

Counterconditioning

A behavior therapy technique where a positive stimulus is introduced with the fear-evoking stimulus at the same time, to try to replace the negative response with a positive one.