The following factors explain the inverse relationship between the price level and the total demand for output, except:
A) A substitution effect
B) A real-balances effect
C) An interest-rate effect
D) A foreign-purchases effect

Question

Quizplus · Accepted Answer

The substitution effect is not a factor that explains the inverse relationship between the price level and total demand for output. The real-balances effect, interest-rate effect, and foreign-purchases effect are the factors that do explain this relationship.

The Following Factors Explain the Inverse Relationship Between the Price