Refer to the information provided in Figure 26.5 below to answer the question(s) that follow. Figure 26.5
-Refer to Figure 26.5. As a result of an increase in the price level, the equilibrium interest rate ________ and the equilibrium output level ________.
A) increases; increases
B) increases; decreases
C) decreases; increases
D) decreases; decreases

Question

Refer to the information provided in Figure 26.5 below to answer the question(s) that follow.  Figure 26.5
-Refer to Figure 26.5. As a result of an increase in the price level, the equilibrium interest rate ________ and the equilibrium output level ________.
A) increases; increases 
B) increases; decreases 
C) decreases; increases 
D) decreases; decreases

Quizplus · Accepted Answer

According to the graph, an increase in price level leads to a decrease in aggregate demand (shifts from AD to AD’), which results in a decrease in output level (from Y to Y’) and an increase in equilibrium interest rate (from r to r’). Therefore, the correct answer is (B) increases; decreases.

Refer to the Information Provided in Figure 26