Which of the following best describes the effects of a fall in the price level?
A)Dollars become more valuable, and interest rates rise.
B)Dollars become more valuable, and interest rates fall.
C)Dollars become less valuable, and interest rates rise.
D)Dollars become less valuable, and interest rates fall.

Question

Quizplus · Accepted Answer

A fall in the price level increases the purchasing power of money, making dollars more valuable. This typically leads to lower interest rates as the demand for money decreases.

Which of the Following Best Describes the Effects of a Fall