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(29) According to liquidity-preference theory, how does an increase in the price level affect the interest rate and output demanded, respectively? The interest rate increases,

(29) According to liquidity-preference theory, how does an increase in the price level affect the interest rate and output demanded, respectively?

The interest rate increases, and output demanded increases.

The interest rate increases, and output demanded decreases.

The interest rate decreases, and output demanded increases.

The interest rate decreases, and output demanded decreases.

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