According to the interest-rate effect, aggregate demand slopes downward (negatively) because
A. lower prices increase money holdings, decrease lending, interest rates rise, and investment spending falls.
B. lower prices increase the value of money holdings and consumer spending increases.
C. lower prices decrease the value of money holdings and consumer spending decreases.
D. lower prices reduce money holdings, increase lending, interest rates fall, and investment spending increases.
Answer: D. lower prices reduce money holdings, increase lending, interest rates fall, and investment spending increases.
You might also like to view...
Refer to Figure 10.1. If the level of real GDP is initially Y2, firms will ________ production until equilibrium is reached at ________
A) increase; Y2 B) decrease; Y2 C) increase; Y1 D) decrease; Y1
In the United States, commercial banks supply about ________% of total credit to nonfinancial businesses
A) 20 B) 75 C) 50 D) 90