An increase in the price level reduces the real value of ﬁnancial assets with ﬁxed money values,
and, as a result, the holders of these assets decrease their spending.

Question

Quizplus · Accepted Answer

When the price level increases, the real value of financial assets with fixed money values (such as bonds) decreases. This means that the purchasing power of these assets is reduced, and as a result, their holders may decrease their spending.

An Increase in the Price Level Reduces the Real Value