Part of the story of the interest rate effect is that a lower price level causes...
Part of the story of the interest rate effect is that a lower price level causes __________ in the demand for credit, which then causes the interest rate to __________.
| a) a decrease; fall |
| b) a decrease; rise |
| c) an increase; fall |
|
d) an increase; rise |
Homework Answers
a) a decrease; fall
Explanation: When the price is low, producers want to produce less and they borrow less. Lower borrowing reduces the demand for loans and interest goes down.
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