All of the following statements are correct except:
A) an increase in the overall price level reduces overall aggregate expenditure.
B) when the price level falls, aggregate expenditure will eventually fall.
C) any excess demand for real balances puts pressure on interest rates to rise.
D) when overall prices decrease, aggregate expenditure increases.

Question

Quizplus · Accepted Answer

B is incorrect because when the price level falls, it generally makes goods and services cheaper, which can lead to an increase in aggregate expenditure, not a fall. This is because consumers' purchasing power increases, allowing them to buy more goods and services for the same amount of money.

All of the Following Statements Are Correct Except