What could create a decrease in the price level and a reduction in real GDP?
A) an increase in interest rates
B) a war in the Middle East
C) declining immigration
D) tax rebates

Question

Quizplus · Accepted Answer

An increase in interest rates typically leads to a decrease in consumer spending and investment, which can cause both a decrease in the price level and a reduction in real GDP. Higher interest rates make borrowing more expensive, reducing spending and investment.

What Could Create a Decrease in the Price Level and a Reduction