According to the real wealth effect, if you are living in a period of rising price levels, the cost of the goods and services you buy
A) decreases and your real income increases.
B) increases and your real income increases.
C) increases and your real income remains the same.
D) increases and your real income decreases.

Question

Quizplus · Accepted Answer

The real wealth effect suggests that as price levels rise, the value of your wealth decreases, leading to a decrease in your real income. This means that the cost of the goods and services you buy will increase, but your purchasing power will decrease because the value of your wealth has decreased.

According to the Real Wealth Effect, If You Are Living