When prices increase the interest rate effect A. will increase and the aggregate demand for goods...

When prices increase the interest rate effect

A.

will increase and the aggregate demand for goods and services will decrease.

B.

will decrease and the aggregate demand for goods and services will decrease.

C.

will not be affected.

D.

will increase and the aggregate demand for goods and services will increase.

Expert Solution

Option A) Will increase and aggregate demand for goods and services will decrease ( is correct)

Rahul Sunny answered 2 years ago

Explain the effect of an increase in aggregate demand on the general price level in the...

Explain the effect of an increase in aggregate demand on the general price level in the short run at a given aggregate supply. Provide any five causes of an increase in aggregate demand.

In the dynamic aggregate demand and aggregate supply model, the rate of inflation will increase if:...

In the dynamic aggregate demand and aggregate supply model, the rate of inflation will increase if: Select one: A. AD shifts to the right by more than the LRAS curve. B. If total production increases faster than total spending. C. SRAS and LRAS curves shifts to the right by the same magnitude. D. AD shifts to the right by less than the LRAS curve.

a. Which of the following explain why the aggregate demand curve slopes downward? The interest-rate effect,...

a. Which of the following explain why the aggregate demand curve slopes downward? The interest-rate effect, the real-balances effect, and the foreign-trade effect The investment effect, the real-balances effect, and the international effect The investment effect, the real-purchases effect, and the foreign-purchases effect The interest-rate effect, the real-purchases effect, and the foreign-purchases effect b. The real-balances effect says that as the price level rises, the real value of money will decrease, resulting in a decrease in the quantity demanded of...

What is the immediate effect when the money supply increases? aggregate demand shifts right aggregate demand...

What is the immediate effect when the money supply increases? aggregate demand shifts right aggregate demand shifts left aggregate supply shifts right aggregate supply shifts left

1. Are the effects of an increase in aggregate demand in the aggregate demand and aggregate supply...

1. Are the effects of an increase in aggregate demand in the aggregate demand and aggregate supply model consistent with the Phillips curve? Explain 2. Explain the connection between the vertical long-run aggregate supply curve and the vertical long-run Phillips curve 3. In the long run what primarily determines the natural rate of unemployment? In the long run what primarily determines the inflation rate? How does this relate to the classical dichotomy?

Equilibrium interest rate is achieved in the money market when aggregate demand for real monetary assets...

Equilibrium interest rate is achieved in the money market when aggregate demand for real monetary assets equals the supply of real monetary assets. a. Write down the condition required for equilibrium in the money market using real quantities of monetary assets. b. The aggregate real money demand function is given as L(R, Y). For a given level of income, real money demand decreases as interest rate increases. Explain why L is negatively related to interest rates. How is the real...

15. When taxes increase, consumption decreases. How is this situation represented in the aggregate demand and aggregate...

15. When taxes increase, consumption decreases. How is this situation represented in the aggregate demand and aggregate supply model? a. by a movement to the left along a given aggregate-demand curve b. by shifting aggregate demand to the left c. by shifting aggregate supply to the left d. by a movement to the right along a given aggregate-demand curve 16. What happens to prices and output when the long-run aggregate-supply curve shifts right? a. Prices and output both increase. b. Prices and...

An increase in taxes when the economy is above full employment ______ aggregate demand and...

An increase in taxes when the economy is above full employment ______ aggregate demand and real GDP, and the price level ______. A. does not change; does not change B. decreases; falls C. increases; falls D. increases; rises The magnitude of the tax multiplier is equal to _______. A. the government expenditure multiplier divided by MPC B. MPC times the government expenditure multiplier C. the government expenditure multiplier D. MPC

An increase in investment creates a in aggregate demand, the aggregate demand curve shifts...

An increase in investment creates a ______ ______ in aggregate demand, the aggregate demand curve shifts ________ potentially brining ________ phase of the business cycle. larger; increase; rightward; expansion larger; decreases; leftward; recession smaller; increases; rightward; expansion smaller; decreases; leftward; recession

How does a fall in aggregate demand affect prices, interest rates and output in the long...

How does a fall in aggregate demand affect prices, interest rates and output in the long and short-run (Giving reference to the IS-LM AS-AD model throughout).

Question