An Indirect Effect of an Increase in the Price Level

question 60

Multiple Choice

An indirect effect of an increase in the price level works through

• A) people substituting out of domestic goods and into foreign goods as exchange rates rise.
• B) changes in trade balances as domestic goods become more expensive, causing interest rates to move in the opposite direction from the change in the exchange rate.
• C) interest rates as people save more as the higher prices make their money balances less attractive.
• D) interest rates as people borrow to maintain their money balances, bidding up interest rates and reducing total planned real expenditures.

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Definitions:

Routine Activities

Regularly occurring behaviors or activities in one's day-to-day life that form patterns of behavior.

Personally Distressing

Experiencing discomfort or distress on a personal level, often affecting one's emotional well-being or mental health.

Anxiety Disorders

Mental health disorders characterized by significant and persistent feelings of anxiety and fear, affecting daily functioning.

Conversion Disorder

A psychological condition where patients suffer from neurological symptoms, such as numbness or blindness, that cannot be explained by medical evaluation.