Why does an increase in the price level cause a decrease in the aggregate quantity of goods and services demanded?
A)because as wealth rises, interest rates rise, and the dollar appreciates
B)because as wealth rises, interest rates fall, and the dollar depreciates
C)because as wealth falls, interest rates rise, and the dollar appreciates
D)because as wealth falls, interest rates fall, and the dollar depreciates

Question

Quizplus · Accepted Answer

An increase in the price level reduces the real value of money holdings, leading to a decrease in wealth. This causes interest rates to rise and the dollar to appreciate, reducing the aggregate quantity of goods and services demanded.

Why Does an Increase in the Price Level Cause a Decrease