The Interest Rate Effect Suggests That

Multiple Choice

The interest rate effect suggests that

A) an increase in the price level decreases the interest rate, which causes businesses and consumers to reduce desired spending.
B) an increase in the price level increases the interest rate, which causes businesses and consumers to reduce desired spending.
C) a decrease in the price level decreases the interest rate, which causes businesses and consumers to reduce desired spending.
D) an increase in the price level increases the money supply, which causes businesses and consumers to increase desired spending.