An increase in the price level decreases planned expenditures because
A) real wealth increases, decreasing expenditure.
B) current prices rise relative to future prices, decreasing expenditure.
C) domestic prices rise relative to foreign prices, increasing net exports.
D) the real interest rate rises, increasing expenditure.

Question

Quizplus · Accepted Answer

An increase in the price level makes current goods more expensive relative to future goods, leading to a decrease in planned expenditures.

An Increase in the Price Level Decreases Planned Expenditures Because