A decrease in the price level results in a(n)________ in household consumption spending and a(n)________ in investment spending.
A)increase; decrease
B)increase; increase
C)decrease; decrease
D)decrease; increase

Question

Quizplus · Accepted Answer

When the price level decreases, households have more purchasing power which leads to an increase in consumption spending. On the other hand, a decrease in price level lowers production costs, making it cheaper for firms to invest in new projects, leading to an increase in investment spending.

A Decrease in the Price Level Results in A(n)________ in Household