When the price level increases, the real value of people's money holdings
A) falls, so they buy more.
B) falls, so they buy less.
C) rises, so they buy more.
D) rises, so they buy less.

Question

Quizplus · Accepted Answer

When the price level increases, the purchasing power of people's money decreases, which means that they can buy fewer goods and services than before. Therefore, they tend to buy less, which leads to a decrease in overall consumption.

When the Price Level Increases, the Real Value of People's