According to the real wealth effect, a higher _____ implies a _____ value of wealth and consumption spending.
A) interest rate; higher
B) price level; higher
C) interest rate; lower
D) price level; lower

Question

Quizplus · Accepted Answer

The real wealth effect states that when the price level increases, the real value of money decreases, leading to lower wealth and consequently lower consumption spending. Hence, a higher price level implies a lower value of wealth and consumption spending.

According to the Real Wealth Effect, a Higher _____ Implies