A Rise in the Price Level That Leads to a Change

question 145

Multiple Choice

A rise in the price level that leads to a change in the interest rate,and therefore to a change in the quantity of aggregate demand,will cause

• A) an upward movement along the aggregate demand curve.
• B) a downward movement along the aggregate demand curve.
• C) a rightward shift of the aggregate demand curve.
• D) a leftward shift of the aggregate demand curve.
• E) no change in the quantity of aggregate demand.

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Definitions:

Risk Aversion

The premise that most people prefer lower risk investments when expected returns are about equal.

NPV

Net Present Value; a method used in capital budgeting to evaluate the profitability of an investment or project.

Abandonment Option

In project management and finance, the option to cease investment in a project if it doesn't meet certain criteria, minimizing losses.

Real Option

A managerial flexibility embedded in investment projects, representing the right, but not the obligation, to undertake certain business decisions, such as expanding, abandoning, or delaying a project.