Asked by Arber Gashi on Jun 29, 2024
Verified
The interest-rate effect is partially explained by the fact that a higher price level reduces money demand.
Interest-Rate Effect
The interest-rate effect describes how changes in the central bank's interest rate influence the level of overall spending in the economy by affecting borrowing costs.
Price Level
A measure of the average of current prices across the entire spectrum of goods and services produced in the economy.
Money Demand
The desire to hold cash or cash-equivalents and the quantity of money that individuals or businesses want to hold.
- Comprehend the principal elements influencing the incline of the aggregate-demand curve.
Verified Answer
SF
Stacy FosterJul 01, 2024
Final Answer :
False
Explanation :
The interest-rate effect is partially explained by the fact that a higher price level increases money demand, which in turn increases interest rates and reduces investment spending.
Learning Objectives
- Comprehend the principal elements influencing the incline of the aggregate-demand curve.