Consider monetary equilibrium and the monetary transmission mechanism.An exogenous fall in the price level will lead to
A) an excess demand for money resulting in a rise in the rate of interest,which shifts the AE function downward and decreases the equilibrium level of income.
B) an excess supply of money resulting in a fall in the rate of interest,which shifts the AE function upward and increases the equilibrium level of income.
C) people being able to buy more with their increased wealth,which will shift the AE function downward and decrease the equilibrium level of income.
D) a movement to the right along the AE function.
E) a movement to the left along the AE function.
Correct Answer:
Verified
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