Refer to the information provided in Figure 12.5 below to answer the questions that follow.
Figure 12.5
-Refer to Figure 12.5.As a result of ________,the equilibrium interest rate increases and the equilibrium output level decreases.
A)an increase in government spending
B)a decrease in government spending
C)an increase in the price level
D)a decrease in the price level

Question

Refer to the information provided in Figure 12.5 below to answer the questions that follow.
  Figure 12.5
-Refer to Figure 12.5.As a result of ________,the equilibrium interest rate increases and the equilibrium output level decreases.
A)an increase in government spending 
B)a decrease in government spending 
C)an increase in the price level 
D)a decrease in the price level

Quizplus · Accepted Answer

An increase in the price level leads to a decrease in the real money supply, which raises the equilibrium interest rate and reduces the equilibrium output level.

Refer to the Information Provided in Figure 12