The Interest Rate Effect of a Change in the Aggregate

Multiple Choice

The interest rate effect of a change in the aggregate price level occurs when:

A) a higher price level decreases the purchasing power of money, resulting in an increase in the interest rate.
B) the Fed uses contractionary monetary policy, causing an increase in the interest rate.
C) government borrowing in the loanable funds market raises the interest rate.
D) the price of a bond increases, reducing the interest rate.