Which of the following is a reason why increases in the price level results in a decline in aggregate expenditure? Price level increases raise real wealth which causes consumption spending and aggregate expenditures to decline. Price level increases cause firms and consumers to hold more money, which raises the interest rate. Higher interest rates lower consumption and planned investment expenditures, which lowers aggregate expenditures. Price level increases in the U.S. relative to other countries, raise net exports, which lowers aggregate expenditures. As the price level rises, government spending falls, which lowers aggregate expenditures.

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Q: A rise in interest rate.

A:

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