Which of the Following Is a Reason Why Increases in the Price

question 177

Multiple Choice

Which of the following is a reason why increases in the price level result in a decline in aggregate expenditure?

• A)Price level increases raise real wealth,which causes consumption spending and aggregate expenditure to decline.
• B)Price level increases cause firms and consumers to hold more money,which raises the interest rate.Higher interest rates lower consumption and planned investment expenditures,which lowers aggregate expenditure.
• C)Price level increases in the United States relative to other countries raise net exports,which lowers aggregate expenditure.
• D)As the price level rises,government spending falls,which lowers aggregate expenditure.

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Definitions:

Depreciable Asset

An asset that loses value over time due to wear and tear or obsolescence and for which depreciation can be applied in accounting.

Chlorinated Hydrocarbons

Chemical compounds containing chlorine, carbon, and hydrogen, which are used in industrial applications but can be harmful to the environment and health.

Pesticides

Chemical substances used to kill or control pests including insects, weeds, and disease-causing organisms, in agricultural and residential settings.

Contact Insecticides

Chemical substances that kill insects upon direct contact.