When a Higher Price Level Generates an Increase in the Interest

question 129

Multiple Choice

When a higher price level generates an increase in the interest rate that induces consumers to borrow less and buy less, this chain of events is referred to as

• A) the real-balance effect.
• B) the interest rate effect.
• C) the open economy effect.
• D) the price level effect.

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Definitions:

Flexible

Capable of adapting to changes and varying circumstances without significant difficulty, often considered an advantageous trait in individuals and organizations.

Relaxed

A state or condition where there is an absence of tension or anxiety, often characterized by calmness and ease.

Variable

A characteristic, number, or quantity that increases or decreases over time, or takes different values in different situations.

Diversify Sources

A strategy to reduce risk in investment or business operations by acquiring a wide range of assets or various types of resources.