Price level changes have their greatest effect on consumers'

Question

Quizplus · Accepted Answer

Price level changes primarily affect consumers' wealth since it influences the purchasing power of their assets and liabilities. When the price level rises, consumers' money buys less, decreasing their purchasing power and reducing their real wealth. Conversely, when the price level falls, consumers' money buys more, increasing their purchasing power and boosting their real wealth. Changes in price level can also affect income, debt, and expectations indirectly but not as significantly as its effect on wealth.

Price Level Changes Have Their Greatest Effect on Consumers