If the Price Level Rises

question 60

Multiple Choice

If the price level rises,

• A)the aggregate expenditures line shifts upward; the economy moves downward along the aggregate demand curve
• B)the aggregate expenditures line shifts downward; the economy moves upward along the aggregate demand curve
• C)the aggregate demand curve shifts to the right; the economy moves along the aggregate expenditure line
• D)the aggregate demand curve shifts to the left; the economy moves along the aggregate expenditure line
• E)the aggregate expenditure line shifts upward; the aggregate demand curve shifts to the right

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Definitions:

Exchange Rates

The expression of one currency's value in the terms of the value of another currency.

Covered Interest Arbitrage

A strategy involving the investment in differing currencies in order to exploit differences in interest rates, while hedging exchange rate risk.

Uncovered Interest Parity

A theory in finance which posits that the disparity in interest rates across two nations matches the anticipated shift in exchange rates between their respective currencies.

International Fisher Effect

An economic theory predicting that the difference in nominal interest rates between two countries is equal to the expected change in their exchange rates over a specific period.