(Consider This) The ratchet effect is the tendency of
A)the price level to increase but not to decrease.
B)nominal GDP to increase more rapidly than real GDP.
C)real interest rates to fall more rapidly than nominal interest rates.
D)consumption to rise year after year regardless of what happens to disposable income.

Question

Quizplus · Accepted Answer

The ratchet effect refers to the phenomenon where prices tend to rise easily but are resistant to falling, meaning the price level can increase but not decrease.

(Consider This) the Ratchet Effect Is the Tendency of