When prices rise,________.
A) money demand tends to fall
B) money supply tends to rise
C) menu costs fall
D) consumers' purchasing power falls

Question

Quizplus · Accepted Answer

When prices rise, the purchasing power of consumers falls, as they are able to buy fewer goods and services with the same amount of money. This is because the price of goods and services has gone up while the amount of money they have remains the same. This results in inflation, which can have negative effects on the economy. Money demand may also rise due to the need for more money to purchase goods and services at higher prices. Money supply is not affected by rising prices. Menu costs may increase if businesses need to update their prices to reflect the higher costs of production.

When Prices Rise,________