If the price level in an economy increases,other things constant,consumption spending is likely to _____.
A)increase because real income increases
B)decrease because real income increases
C)increase because the real value of wealth increases
D)decrease because the real value of wealth decreases
E)increase because nominal income increases

Question

Quizplus · Accepted Answer

If the price level in an economy increases, the purchasing power of money decreases. This means that the real value of wealth decreases. As a result, consumers will have to spend more money to maintain their standard of living, leading to a decrease in consumption spending.

If the Price Level in an Economy Increases,other Things Constant,consumption