When the price level decreases,
A) the demand for money falls and the interest rate falls.
B) holders of ﬁnancial assets with ﬁxed money values decrease their spending.
C) holders of ﬁnancial assets with ﬁxed money values have less purchasing power.
D) there is a decrease in consumer spending that is sensitive to changes in interest rates.

Question

Quizplus · Accepted Answer

When the price level decreases, the demand for money falls because people need less money for transactions, leading to a decrease in interest rates as there is less competition for borrowing funds.

When the Price Level Decreases