According to the real wealth effect, if you are living in a period of rising price levels, the cost of the goods and services you buy ______ and your real income ___________.

Question

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According to the real wealth effect, if the price level rises, the value of people's assets such as their homes and investments increases. This makes them feel richer and they tend to spend more, which drives up demand and further increases prices. However, their actual purchasing power is reduced as the cost of goods and services increases faster than their income. Therefore, the cost of the goods and services people buy increases and their real income decreases.

According to the Real Wealth Effect, If You Are Living