Which of the following is incorrect?
A) As the U.S. price level rises, U.S. goods become relatively more expensive so that U.S. exports fall and U.S. imports rise.
B) As the price level falls, the demand for money declines, the interest rate declines, and interest-rate-sensitive spending increases.
C) When the price level increases, real balances increase and businesses and households ﬁnd themselves wealthier and therefore increase their spending.
D) Given aggregate demand, an increase in aggregate supply increases real output and, assuming downward-ﬂexible prices, reduces the price level.

Question

Quizplus · Accepted Answer

When the price level increases, real balances decrease, not increase, making businesses and households less wealthy and reducing their spending.

Which of the Following Is Incorrect