Question

The interest-rate effect suggests that
A) an increase in the price level will increase the demand for money, increase interest rates, and decrease consumption and investment spending.
B) a decrease in the supply of money will increase interest rates and reduce interest-sensitive consumption and investment spending
C) an increase in the price level will decrease the demand for money, reduce interest rates, and increase consumption and investment spending.
D) an increase in the price level will increase the demand for money, reduce interest rates, and decrease consumption and investment spending.

Answer 1

D is the answer

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Answer 2

A) an increase in the price level will increase the demand for money, increase interest rates, and decrease consumption and investment spending.

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The interest-rate effect suggests that  an increase in the price level will increase the demand for money, increase interest rates, and decrease consumption and investment spending.