Question

which of the following properly describes the interest-rate effect that helps explain the slope of the aggregate-demand curve? a. as the price level increases, the interest rate rises, so spending falls. b. as the money supply increases, the interest rate falls, so spending rises. c. as the price level increases, the interest rate falls, so spending rises. d. as the money supply increases, the interest rate rises, so spending falls.

Answer 1

Option C: Because the aggregate demand curve slopes downward and there is an inverse relationship between the price level and spending, spending falls as the price level rises and the interest rate rises.

Wealth is the sum of all assets owned by a company, individual, organization, or other entity.It is the cash or market value, expressed in dollars, of all acquired assets after deducting all debts.

What is the impact of interest rates?

The term "interest rate effect" refers to any changes in the macroeconomic environment brought about by changes in the country's interest rate directly.

The term "interest-rate effect" describes how a change in the price level affects interest rates and, as a result, investment spending and consumption.Interest rates rise when prices rise, which reduces spending on investments and consumption, particularly on durable goods.

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