An increase in the price level causes

Question

Quizplus · Accepted Answer

An increase in the price level results in reduced investment spending because of the increase in interest rates. It also causes a decrease in net exports because the higher prices make Canadian goods relatively more expensive, leading to a reduction in foreign demand. Hence, option C is the correct answer. Option A is incorrect because it states that there will be an increase in net exports, which is not likely. Option B is incorrect because it states that there will be an increase in investment spending, which is also unlikely. Option D is incorrect because it talks about increased government spending, which is not related to the increase in the price level.

An Increase in the Price Level Causes