2. Which of the following happens when the price level decreases?

Question

A. The purchasing power of accumulated saving decreases.

B. Net exports decrease.

C. Consumption decreases.

D. Interest-sensitive spending, such as investment, increases.

Answer 1

Simple economic theory would say D, because interest rates decline, but the REAL interest rate does not.
Price level decreases are rare and are usually a sign of a troubled economy like the 1930's in the US and the 1990's Japan. So C is the result you see in the real world.

Answer 2

d) interest blah blah blah...

A lowered price level has to do with disinflation...which you probably don't care about and just want an answer so you can hand in your assignment tomorrow...so d. Savings increases.