An increase in the price level ________ real wealth,which causes consumption to ________.
A)lowers; increase
B)lowers; decrease
C)raises; increase
D)raises; decrease

Question

Quizplus · Accepted Answer

An increase in price level lowers real wealth because the buying power of money decreases. As a result, consumers tend to spend less due to the reduced purchasing power of their income. Therefore, consumption decreases.

An Increase in the Price Level ________ Real Wealth,which Causes