Which of the Effects Listed Below Increases the Quantity of Goods

question 84

Multiple Choice

Which of the effects listed below increases the quantity of goods and services demanded when the price level falls and decreases the quantity of goods and services demanded when the price level rises?

• A)the wealth effect
• B)the interest-rate effect
• C)the exchange-rate effect
• D)All of the above are correct.

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Definitions:

Perfect Substitutes

Perfect substitutes are two goods that can be used in place of each other with no loss of utility or preference by consumers.

Income Effect

Refers to the change in an individual's or economy's purchase of goods and services resulting from changes in income levels.

Substitution Effect

The change in consumption patterns due to a change in relative prices, holding the consumer's level of utility constant.

Price

The fiscal amount needed for the acquisition of a product or service.