A decrease in the price level will
A)decrease consumption because the price of goods is lower
B)make the consumption function flatter
C)increase consumption because prices are wages,so people have more income
D)increase consumption because the value of wealth has increased
E)decrease consumption because rising interest rates make it more expensive to borrow

Question

Quizplus · Accepted Answer

A decrease in the price level will increase the real value of wealth, as the purchasing power of money increases. As a result, people will feel wealthier and may increase their consumption spending.

A Decrease in the Price Level Will