What will result as part of the interest rate effect when the price level falls?
A)A higher quantity of nominal GDP will be demanded.
B)Money supply will decrease.
C)The dollar amount of investment will decrease.
D)Interest rates will decrease.

Question

Quizplus · Accepted Answer

According to the interest rate effect, when the price level falls, the demand for money decreases. As a result, interest rates decrease. This leads to an increase in investment spending and an overall increase in the quantity of real GDP demanded. Therefore, the correct answer is D.

What Will Result as Part of the Interest Rate Effect