Which Statement Best Describes the Effects of a Fall in the Price

question 13

Multiple Choice

Which statement best describes the effects of a fall in the price level?

• A) Dollars become more valuable, and interest rates rise.
• B) Dollars become more valuable, and interest rates fall.
• C) Dollars become less valuable, and interest rates rise.
• D) Dollars become less valuable, and interest rates fall.

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Definitions:

Check Clearing

is the process by which banks settle transactions involving checks, ensuring that the amount specified is transferred from the bank on which the check is drawn to the bank of the depositor.

Lender of Last Resort

A function usually performed by a central bank to provide funds to financial institutions facing liquidity problems to prevent their failure and systemic risks to the economy.

Excess Reserves

The amount of reserves held by banks over and above the legally mandated requirement.

Destroyed Money

Money that has been taken out of circulation, either physically by damage or dematerialization, or digitally by central authorities to control the money supply.