The Real Balances Effect Says That an Increase in the Price

question 130

Multiple Choice

The real balances effect says that an increase in the price level

• A)Increases the price of U.S.produced goods,causing Americans to buy more imported goods.
• B)Increases the price of U.S.produced goods,causing foreign consumers to buy fewer U.S.goods.
• C)Increases the need to borrow,which drives up interest rates and reduces loan-financed purchases.
• D)Reduces the real value of a fixed amount of savings,consequently reducing the quantity of goods and services purchased.

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