If government spending and the price level increase,then
A)the interest rate increases,consumption declines,and investment spending declines.
B)the interest rate decreases,consumption declines,and investment spending declines.
C)the interest rate increases,consumption increases,and investment spending increases.
D)the interest rate decreases,consumption increases,and investment spending increases.

Question

Quizplus · Accepted Answer

When government spending increases, it increases the demand for goods and services, leading to an increase in the price level. This causes the central bank to increase the interest rate to control inflation. The increase in interest rates leads to a decrease in consumption and investment spending due to the cost of borrowing increasing.

If Government Spending and the Price Level Increase,then