Refer to the information provided in Figure 26.5 below to answer the question(s) that follow. Figure 26.5
-Refer to Figure 26.5. As a result of ________, the equilibrium interest rate increases and the equilibrium output level decreases.
A) an increase in government spending
B) a decrease in government spending
C) an increase in the price level
D) a decrease in the price level

Question

Refer to the information provided in Figure 26.5 below to answer the question(s) that follow.  Figure 26.5
-Refer to Figure 26.5. As a result of ________, the equilibrium interest rate increases and the equilibrium output level decreases.
A) an increase in government spending 
B) a decrease in government spending 
C) an increase in the price level 
D) a decrease in the price level

Quizplus · Accepted Answer

An increase in the price level typically leads to higher demand for money, which raises the equilibrium interest rate and reduces the equilibrium output level due to decreased investment and consumption.

Refer to the Information Provided in Figure 26