Holding All Other Things Constant, When the Price Level Rises

question 74

Multiple Choice

Holding all other things constant, when the price level rises, interest rates:

• A)rise, firms want to borrow more for new plants and equipment, and households want to borrow less for homebuilding.
• B)rise, firms want to borrow less for new plants and equipment, and households want to borrow less for homebuilding.
• C)fall, firms want to borrow more for new plants and equipment, and households want to borrow more for homebuilding.
• D)fall, firms want to borrow less for new plants and equipment, and households want to borrow more for homebuilding.
• E)remain unaffected and firms borrow the same amount for new plants and equipment but households borrow less for homebuilding.

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Definitions:

Equality

A state or condition of being equal, especially in status, rights, and opportunities.

Total Surplus

The sum of consumer and producer surplus, representing the total benefit to society from a market transaction.

Equilibrium

The state in a market where supply equals demand, leading to a stable price for a given good or service.

Consumer Surplus

The difference in what consumers think to pay for a good or service and the actual amount they pay.