Because of the Wealth Effect, a Rising Aggregate Price Level

question 143

Multiple Choice

Because of the wealth effect, a rising aggregate price level _____ the purchasing power of wealth and therefore _____ output demanded.

• A) increases; increases
• B) increases; reduces
• C) reduces; increases
• D) reduces; reduces

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Definitions:

Monetary Policy

The process by which the central bank or monetary authority of a country controls the supply of money, often targeting an inflation rate or interest rate to ensure economic stability and growth.

Credit Markets

Financial markets where borrowers can obtain funds from lenders, typically through the issuance of debt securities or loans.

Recession

A significant decline in economic activity spread across the economy, lasting more than a few months, visible in industrial production, employment, real income, and wholesale-retail trade.

Increased Unemployment

A rise in the percentage of the labor force that is without work but available for and seeking employment.