An Increase in the Price Level Results in a Decline

question 66

Multiple Choice

An increase in the price level results in a decline in aggregate demand because people's "net worth" decreases and will spend less. This effect is called the:

• A) interest rate effect.
• B) income effect.
• C) wealth effect.
• D) trade effect.

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Definitions:

Contribution Margin Ratio

A financial metric that measures the proportion of sales revenue that exceeds variable costs and contributes to covering fixed expenses and generating profit.

Net Loss

The result when a company's total expenses exceed its total revenues during a specific period, indicating a negative profit.

Break-Even Point

The point at which total costs and total revenues are exactly equal, resulting in no net profit or loss for a business.

Net Operating Income

The income from a company's primary business operations, excluding deductions of interest and taxes.