Part of the story of the interest rate effect is that a lower price level causes __________ in the supply of credit,which then causes the interest rate to __________.
A) a decrease; fall
B) a decrease; rise
C) an increase; fall
D) an increase; rise

Question

Quizplus · Accepted Answer

A lower price level increases the real value of money, leading to more savings and an increase in the supply of credit, which causes the interest rate to fall.

Part of the Story of the Interest Rate Effect Is