According to the Interest Rate Effect, as the Price Level

question 112

Multiple Choice

According to the interest rate effect, as the price level decreases, households and firms' holdings of money ____, interest rates ____, investments ____, and the quantity RGDP demanded ____.

• A)​increases, decrease, increase, decreases
• B)​increases, increase, increase, decreases
• C)​decreases, decrease, increase, increases
• D)​increases, increase, decrease, decreases

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Definitions:

Rate of Interest

The percentage of a sum of money charged for its use, typically expressed as an annual percentage rate.

Households

Units in an economy consisting of one or more people who live in the same dwelling and share meals or living accommodation, and may consist of a single family or some other grouping of people.

Aggregate Demand

Cumulative need for every type of good and service in an economy, observed at a consistent overall price point across a chosen period.

Money Supply

The total economic monetary resources present at a specific time.