An increase in the aggregate price level will cause
A)a reduction in the interest rate and a rightward shift in the IS curve.
B)a upward shift in the LM curve and an increase in the interest rate.
C)an increase in investment and an increase in output.
D)an ambiguous effect on investment.

Question

Quizplus · Accepted Answer

An increase in the aggregate price level results in a decrease in the real money supply, which causes the LM curve to shift upwards. This causes an increase in the interest rate.

An Increase in the Aggregate Price Level Will Cause