A Reduction in the Aggregate Price Level Will Cause

question 54

Multiple Choice

A reduction in the aggregate price level will cause

• A)an increase in the interest rate and a leftward shift in the IS curve.
• B)a downward shift in the LM curve and a reduction in the interest rate.
• C)a reduction in investment and a reduction in output .
• D)an ambiguous effect on investment.

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Definitions:

Long Run

A period of time in economics sufficient for all markets to adjust to changes, including the production capacity of the industry.

Price Paid

The actual amount of money exchanged for acquiring a good or service.

Resource Market

A market where raw materials, services, and other inputs required to produce goods and services are bought and sold.

Shift Resources

The reallocation of resources from one use to another, often in response to changing market conditions.