The Interest Rate Effect Is Considered to Have

question 53

Multiple Choice

The interest rate effect is considered to have

• A)a direct effect because interest rates move in the same direction as changes in quantity demanded.
• B)a direct effect because increases in the price level lead to increases in interest rates.
• C)an indirect effect because price level increases cause borrowing to increase,which raises interest rates and reduces quantity demanded for goods and services.
• D)an indirect effect because higher prices lead to lower interest rates.