A rise in the real interest rate will cause which of the components of aggregate demand to decline?
A) only C
B) only C and I
C) only C, I, and NX
D) C, I, G, and NX
The best explanation of why the aggregate demand curve has a negative slope is that
A) at a higher price level households cut back on their spending on goods and services.
B) at a higher price level business firms wish to produce more goods and services.
C) a higher price level results in lower real money balances and a higher real interest rate.
D) a higher price level results in less government spending on transfers, such as unemployment insurance and social security payments.
Everything else being constant,a lower real interest rate
A) increases desired saving and net exports.
B) decreases desired saving but increases net exports.
C) increases desired saving and investment.
D) increases desired investment but decreases net exports.
A decrease in the price level will lead to
A) a decrease in the real interest rate and an increase in net exports.
B) an increase in the real interest rate and an increase in net exports.
C) a decrease in the real interest rate and a decrease in net exports.
D) an increase in the real interest rate and a decrease in net exports.