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