Answered

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An increase in the price level shifts the money demand curve to the left, causing interest rates to increase.

A. True
B. False

Sagot :

GinnyAnsweridn

Final answer:

An increase in the price level shifts the money demand curve to the right, causing various changes in the economy.


Explanation:

An increase in the price level causes the money demand curve to shift to the right. When people want to hold more money at each interest rate due to a change in expectations, preferences, or transactions costs, the money demand curve shifts to the right, leading to a higher interest rate.

Higher interest rates resulting from an increase in the price level will lead to a lower quantity of investment, a higher exchange rate, and a decrease in net exports. This causes the aggregate demand curve to shift to the left, resulting in a decrease in real GDP and the price level.


Learn more about effect of price level on money demand and interest rates here:

https://brainly.com/question/28175271


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