Which statement 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

When the price level falls, each dollar can buy more goods and services, hence dollars become more valuable. Lower price levels typically lead to lower interest rates as the demand for borrowing decreases and the supply of savings increases.

Which Statement Best Describes the Effects of a Fall in the Price