Question

If the price level increases, then which of the following will happen? a. Interest rates will...

If the price level increases, then which of the following will happen?

a. Interest rates will increase and hence investment will decrease

b. Interest rate will decreases and investment will increase

c. Both Interest rate and consumption will increase

d. Both Interest rate and investment will decrease

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Answer #1

At a higher price level the consumption will fall, and the interest rate will increase that will lead to a lower investment and fall in the demand further. The answer is "A".

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