Increases in the overall price level:
A) increase people's dollar-denominated wealth.
B) generally have no effect on spending.
C) increase consumption.
D) reduce consumption.

Question

Quizplus · Accepted Answer

Increases in the overall price level reduce the purchasing power of money, meaning that people are able to buy fewer goods and services with the same amount of money. This reduction in purchasing power leads to a decrease in consumption as people become more hesitant to spend their money.

Increases in the Overall Price Level