According to Keynes, when the price level rises, it causes the interest rate to do what? It causes the level of business spending to do what? a. It causes a decrease in the interest rate, as people adjust to higher prices and purchase less; business spending decreases as well. b. It causes a decrease in the interest rate, as people adjust to higher prices and purchase less; business spending goes up. c. It causes an increase in the interest rate, due to greater consumer demand for money to spend; business spending goes up as well. d. It causes an increase in the interest rate, due to a greater consumer demand for money to spend; business spending decreases.

According to Keynes, when the price level rises, it causes the interest rate to do what? It causes the level of business spending to do what? a. It causes a decrease in the interest rate, as people adjust to higher prices and purchase less; business spending decreases as well. b. It causes a decrease in the interest rate, as people adjust to higher prices and purchase less; business spending goes up. c. It causes an increase in the interest rate, due to greater consumer demand for money to spend; business spending goes up as well. d. It causes an increase in the interest rate, due to a greater consumer demand for money to spend; business spending decreases.

Economics (MindTap Course List)

13th Edition

ISBN:9781337617383

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter10: Keynesian Macroeconomics And Economic Instability: A Critique Of The Self Regulating Economy

Section: Chapter Questions

Problem 15QP

See similar textbooks

Similar questions

Does Says law apply more accurately in the long run or the short run? What about Keynes law?
The government of Prime Minister Shinzo Abe said it would oﬀer some $15 billion in ﬁnancing for businesses hit by the novel coronavirus and spend about $4 billion directly to prop up the economy.“As the top priority for the time being, we have to put all our eﬀort into keeping businesses alive,” Mr. Abe said.Still, in a $5 trillion economy, the measures may not be big enough to dig the country out of a big hole. SMBC Nikko Securities economist Junichi Makino said he expected the Japanese economy to shrink at an annualized pace of 5.8% in the January-to-March period following a 7.1% contraction in the last quarter of 2019.Japan is set to oﬀer emergency no-interest loans of about $1,900 to newly jobless people and others in trouble, and the borrowers may not have to pay the money back if they can’t ﬁnd work. Businesses at risk from the virus can access ﬁnancing or loan guarantees from the government QUESTIONS: 1. How would the financing plan designed to supports businesses impact the…
If the GDP increases what is expected to happen. to the interest rate? Please answer uniquely in 500 words.
Why did Keynes believe that the proper response to a period of recession was for the government to increase its spending? How could this policy help to combat recession? Use diagram.
If the price level in the economy goes up while all other factors affecting the economy remains the same,briefly explain how this increase in P will reduce C, I and NX.
If an economy is not expanding and the economy is therefore suffering from high unemployment, then would putting more money in the economy make matter better or worse
Which of the following will NOT lead to an increase in real GDP? A. On average, people in a country decide to increase the number of hours they work by 5%. B. Spending on homeland security increases in response to a terrorist attack. C. The price level and nominal GDP increase by 10%. D. Due to lower interest rates by the Fed investors increase their investmen
Other things the same, as the price level rises, the real value of a dollar Answer rises, and interest rates rise. rises, and interest rates fall. falls, and interest rates rise. falls, and interest rates fall.
Show and explain by using a graph, what will happen to the price level and real GDP if the quantity of money increases and the increase is not anticipated; that is, the price level is not expected to change.
How does a change in the interest rate affect aggregate investment ? What if firms prefer to pay for investment spending out of retained earnings ? Does a change in the interest rate still affect aggregate investment Does the amount of government spending in an econ omy respond directly to changes in aggregate income , wealth , or interest rates ? Does it respond indirectly to changes in these variables ?
Which of the following correctly describes how a decrease in the price level affects consumption spending? Select one: a. A decrease in the price level raises real wealth, which causes consumption to increase. b. A decrease in the price level decreases the amount of money a household needs to buy goods and so raises the interest rate, which causes consumption to increase. c. A decrease in the price level increases the amount of money a household needs to buy goods and so raises the interest rate, which causes consumption to increase. d. A decrease in the price level lowers real wealth, which causes consumption to decrease.
A year ago a country reduced the tax rate on all interest income from 20% to 10%. During the year private saving was $500 billion as compared to $400 billion the year before the tax reform. Taxes on interest income fell by $10 billion. Assuming no other changes in income, or government revenues or spending, which of the following is correct? a. the substitution effect was larger than the income effect; national saving rose b. the substitution effect was larger than the income effect; national saving fell c. the income effect was larger than the substitution effect; national saving rose d. the income effect was larger than the substitution effect; national saving fell