In the Context of the Aggregate-Demand Curve,the Interest-Rate Effect Refers

question 86

Multiple Choice

In the context of the aggregate-demand curve,the interest-rate effect refers to the idea that,when the price level increases,

• A)the real value of money decreases;in turn,the real value of the dollar increases in foreign exchange markets,which decreases net exports.
• B)the real value of money decreases;in turn,interest rates increase,which decreases net exports.
• C)households increase their holdings of money;in turn,interest rates decrease,which reduces spending on investment goods.
• D)households increase their holdings of money;in turn,interest rates increase,which reduces spending on investment goods.

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Definitions:

Ownership

The legal right to possess, use, and dispose of anything of value, including tangible and intangible assets.

Held-to-maturity Securities

Debt securities that a company has the intent and ability to hold until they mature, not to be sold beforehand.

Debt Investments

Investments made through the purchase of bonds, notes, or other financial instruments that obligate the issuer to pay the investor fixed or variable interest payments and to repay the principal at maturity.

Maturity Date

The specified date on which the final payment of a loan, bond, or financial agreement is due to be paid.