In the income-expenditure model, if the price level increases, the wealth and interest rate effects will decrease planned expenditures.

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This is because an increase in the price level means that households and businesses will have to spend more on goods and services, leaving them with less disposable income and reducing their ability to save and invest. As a result, both the wealth effect (the decrease in consumption due to a decrease in the value of assets) and the interest rate effect (the decrease in investment due to an increase in interest rates) will lower planned expenditures.

In the Income-Expenditure Model, If the Price Level Increases, the Wealth