What does a fall in the economy's overall level of prices tend to do?
A) It tends to raise both the quantity demanded and supplied of goods and services.
B) It tends to raise the quantity demanded of goods and services, but lower the quantity supplied.
C) It tends to lower the quantity demanded of goods and services, but raise the quantity supplied.
D) It tends to lower both the quantity demanded and the quantity supplied of goods and services.

Question

Quizplus · Accepted Answer

A fall in the economy's overall level of prices tends to increase the quantity demanded of goods and services because consumers' purchasing power increases, allowing them to buy more. However, it tends to decrease the quantity supplied because producers might receive lower revenues, making production less profitable.

What Does a Fall in the Economy's Overall Level of Prices