Refer to the information provided in Figure 11.5 below to answer the questions that follow. Figure 11.5
-Refer to Figure 11.5. 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 11.5 below to answer the questions that follow.  Figure 11.5
-Refer to Figure 11.5. 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 higher demand for money, which raises the equilibrium interest rate and reduces investment and consumption, thereby decreasing the equilibrium output level.

Refer to the Information Provided in Figure 11