__________explains why price level decreases for a given supply of nominal money balances cause an increase in the quantity of aggregate demand.
A)The substitution-of-foreign-goods effect
B)The wealth effect or real-balances effect
C)The real income effect
D)Long-run equilibrium

Question

Quizplus · Accepted Answer

The wealth effect or real-balances effect explains that a decrease in the price level increases the real value of existing nominal money balances, thereby increasing the purchasing power of consumers' wealth. This, in turn, leads to an increase in aggregate demand.

__________Explains Why Price Level Decreases for a Given Supply of Nominal