Question

If there’s an increase in the aggregate price level, money demand will_________ and the interest rate...

If there’s an increase in the aggregate price level, money demand will_________ and the interest rate will________.

A. Increase, Increase
B. Increase, Decrease
C. Decrease, Decrease
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Answer #1

Answer:

If there’s an increase in the aggregate price level, money demand will increase and the interest rate will increase .

A. Increase, Increase

Explanation:

If there’s an increase in the aggregate price level, money demand will increase and the interest rate will increase .As the price level rises the purchasing power of your money ill decline, so people will carry more money to buy the same thing. Therefore, people will demand more money, then interest rate will increase

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