QUEST 2 points Save Answer As the price level decreases, other things being equa

Question

QUEST 2 points Save Answer As the price level decreases, other things being equal, a. the quantity of real gross domestic product demanded increases. b. real gross domestic product supplied increases. c. the quantity of real gross domestic product denanded decreases. O d. aggregate demand increases QUESTION 2 2 points Save Answer The interest rate effect suggests that the negative slope of the aggregate demand curve results at least in part because changes in the price level affect a. the real purchasing power of assets. O b. the level of income. c. the holdings of money by households and firms. d. domestic purchases of foreign goods. QUESTION 3 2 points Save Answer According to the interest rate effect, as the price level increases, households and firms' holdings of money, interest ratesinvestmentsand the quantity RGDP demanded O c. d. increases, increase,

Explanation / Answer

1. a the quantity of real gross domestic demanded increases
Explanation: Because of the law of demand at work which states that there is an inverse relation between price level and quantity demanded.

2. c the holdings of money by households and firms
Price level and demand for money are positively related.

3.d increase, increases, decrease, decreases
With increase in price level, more money is demanded for transactions. This leads to higher interest rate. Hence, investment and quantity demanded falls.

4. d falls and firms want to borrow more for new plants and equipment and households want to borrow more for homebuilding
Lower price level leads to lower interest rate. Hence, demand for investment rises.

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