Which of the following is a reason why increases in the price level results in a decline in aggregate expenditure? Price level increases raise real wealth which causes consumption spending and aggregate expenditures to decline. 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 expenditures. Price level increases in the U.S. relative to other countries, raise net exports, which lowers aggregate expenditures. As the price level rises, government spending falls, which lowers aggregate expenditures.
Which of the following is a reason why increases in the price level results in a decline in aggregate expenditure? Price level increases raise real wealth which causes consumption spending and aggregate expenditures to decline. 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 expenditures. Price level increases in the U.S. relative to other countries, raise net exports, which lowers aggregate expenditures. As the price level rises, government spending falls, which lowers aggregate expenditures.
Chapter19: The Keynesian Model In Action
Section: Chapter Questions
Problem 3SQ
Related questions
Question
Which of the following is a reason why increases in the
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.Recommended textbooks for you
Exploring Economics
Economics
ISBN:
9781544336329
Author:
Robert L. Sexton
Publisher:
SAGE Publications, Inc
