Other things equal, a decrease in the price level ________ the equilibrium interest rate and ________ equilibrium output.
A) increases; increases
B) increases; decreases
C) decreases; increases
D) decreases; decreases

Question

Quizplus · Accepted Answer

A decrease in the price level shifts the money supply curve to the left, increasing the equilibrium interest rate. This also increases investment and consumption, leading to an increase in equilibrium output.

Other Things Equal, a Decrease in the Price Level ________