As the price level falls and other things remain the same, real wealth__________and___________ .
A) increases; the quantity of real GDP demanded increases
B) increases; aggregate demand increases
C) decreases; the quantity of real GDP demanded decreases
D) decreases; short-run aggregate supply decreases

Question

Quizplus · Accepted Answer

As the price level falls, purchasing power increases, which means real wealth increases. This increase in real wealth will lead to an increase in consumer spending and investment, resulting in an increase in the quantity of real GDP demanded. Therefore, choice A is the correct answer.

As the Price Level Falls and Other Things Remain the Same