Other things the same,an increase in the price level induces less spending on
A)investment and net exports.
B)investment,but not net exports.
C)net exports,but not investment.
D)neither net exports nor investment.

Question

Other things the same,an increase in the price level induces less spending on ​
A)​investment and net exports.
B)​investment,but not net exports.
C)​net exports,but not investment.
D)​neither net exports nor investment.

Quizplus · Accepted Answer

An increase in price level results in higher interest rates, which reduces investment spending. Also, as the price level increases, exports become more expensive and less competitive, reducing net exports. Therefore, both investment and net exports decrease when the price level increases.

Other Things the Same,an Increase in the Price Level Induces