Which statement is consistent with an increase in the price level?
A) Dollars become more valuable, and interest rates rise.
B) Dollars become more valuable, and interest rates fall.
C) Dollars become less valuable, and interest rates rise.
D) Dollars become less valuable, and interest rates fall.

Question

Quizplus · Accepted Answer

An increase in the price level means that a given amount of dollars can buy fewer goods and services, which indicates a decrease in the value of dollars. As a result, interest rates would rise to compensate lenders for the decreased purchasing power of the currency.

Which Statement Is Consistent with an Increase in the Price