When the Price Level Falls, What Happens to the Number

question 48

Multiple Choice

When the price level falls, what happens to the number of dollars needed to buy a representative basket of goods?

• A) It increases, so the value of money rises.
• B) It increases, so the value of money falls.
• C) It decreases, so the value of money rises.
• D) It decreases, so the value of money falls.

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Definitions:

Marginal Analysis

The comparison of marginal (“extra” or “additional”) benefits and marginal costs, usually for decision making.

Marginal Benefits

The uplift in utility or enjoyment gained through consuming or producing an added unit of a good or service.

Marginal Costs

The added cost incurred when one more unit of a good or service is produced.

Marginal Benefit

The additional pleasure or utility gained when one more unit of a good or service is consumed.