The Real Balances Effect Predicts That Higher Prices

question 63

Multiple Choice

The real balances effect predicts that higher prices:

• A) make people worse off by reducing the value of their wealth, leading them to save more and spend less.
• B) make people worse off by reducing the value of their wealth, leading them to save less and spend more.
• C) make people better off by increasing the value of their wealth, leading them to save less and spend more.
• D) increase borrowing, leading to higher interest rates and less investment.
• E) make domestic goods relatively more expensive, increasing the demand for domestic goods and decreasing the demand for foreign goods.

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Definitions:

FCC

The Federal Communications Commission (FCC) is a United States government agency that regulates interstate and international communications by radio, television, wire, satellite, and cable.

Radio Stations

Broadcast outlets that transmit audio content via radio waves to reach a wide audience.

Media Conglomerate

A company that owns large numbers of companies in various mass media such as television, radio, publishing, and films.

Monopolistic Power

The ability of a single entity or company to control or dominate an industry or sector, often leading to reduced competition.