Multiple Choice
Suppose a country has no trade with other countries and people can borrow as much money as they want at the current interest rate.An increase in the price level will generate
A) a decrease in quantity demanded because of the real-balance effect.
B) a decrease in quantity demanded because of the open-economy effect and the indirect effect.
C) a decrease in quantity demanded because the real-balance effect will be stronger than the indirect effect and the open-economy effect.
D) a decrease in quantity demanded because the indirect effect will be stronger than the real-balance effect.
Correct Answer:
Verified
Correct Answer:
Verified
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