A Decrease in the Price Level Makes Consumers Feel Wealthier

question 160

True/False

A decrease in the price level makes consumers feel wealthier, so they purchase more. This logic helps explain why the aggregate demand curve slopes downward.

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Definitions:

Full Capacity

The maximum level of output that a company can sustain within a given period, utilizing all available resources efficiently.

Fixed Assets

Long-term tangible assets, such as buildings and machinery, used in the operations of a business that are not expected to be converted into cash within a year.

Unused Capacity

The existing but not currently utilized production or operational capacity within a business.

External Financing

Funds a company obtains from outside sources, like bank loans or selling shares, to finance its operations.