A decrease in the price level in an economy implies that _____.
A)the spending multiplier will be equal to the marginal propensity to consume
B)there will be an increase in investment
C)there will be a decrease in investment
D)the value of the spending multiplier will be equal to one
E)the value of the spending multiplier will be equal to zero

Question

Quizplus · Accepted Answer

A decrease in the price level in an economy typically leads to lower interest rates, which in turn makes borrowing cheaper. This encourages businesses to invest more due to the lower cost of financing, hence leading to an increase in investment.

A Decrease in the Price Level in an Economy Implies