Which of the following is a reason why increases in the price level result in a decline in aggregate expenditure?
A) Price level increases in the United States relative to other countries raise net exports, which lowers aggregate expenditure.
B) As the price level rises, government spending falls, which lowers aggregate expenditure.
C) 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.
D) Price level increases raise real wealth, which causes consumption spending and aggregate expenditure to decline.
C
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Among the opportunity costs of a firm are all of the following EXCEPT
A) the owner's forgone wage. B) costs of resources bought in markets, such as labor. C) normal profits. D) economic profits.
Whenever the expected inflation rate is positive
A) the real interest rate is greater than the nominal interest rate. B) the real interest rate is negative. C) the real interest rate is positive. D) the nominal interest rate must be equal to the real interest rate. E) none of the above