If the money supply is fixed,decreases in the price level
A) reduce the total real output households and businesses want to purchase.
B) reduce the average money cost of each transaction.
C)shift the aggregate demand curve upward and to the right.
D) shift the aggregate supply curve upward and to the left.
E) raise interest rates and reduce total business borrowing.

Question

Quizplus · Accepted Answer

When the price level decreases and the money supply is fixed, the average money cost of each transaction is reduced. This is because the same amount of money can now buy more goods or services due to the lower prices, effectively reducing the cost of transactions in real terms.

If the Money Supply Is Fixed,decreases in the Price Level