1. Which of the following properly describes the interest-rate effect?
a. A higher price level leads to higher money demand, higher money demand leads to higher interest rates, and a higher interest rate increases the quantity of goods and services demanded.
b. A higher price level leads to higher money demand, higher money demand leads to lower interest rates, and a lower interest rate reduces the quantity of goods and services demanded.
c. A lower price level leads to lower money demand, lower money demand leads to lower interest rates, and a lower interest rate reduces the quantity of goods and services demanded.
d. A lower price level leads to lower money demand, lower money demand leads to lower interest rates, and a lower interest rate increases the quantity of goods and services demanded.
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