For each of the following scenarios, determine whether the situation described can be attributed to the real-balances effect, the interest-rate effect, or the foreign-purchases effect.
As a result of an increase in the price level, the cost of borrowing increases, which causes people to buy fewer cars.
a) Interest-rate effect
b) Foreign-purchases effect
c) Real-balances effect
When the price level decreases, restaurants become busier as more people purchase restaurant meals.
a) Real-balances effect
b) Foreign-purchases effect
c) Interest-rate effect