As Prices Rise, Consumers and Businesses Will Want to Hold

question 208

Multiple Choice

As prices rise, consumers and businesses will want to hold larger money balances. This will lead to

• A) a reduction in the demand for resources and reduced resource prices.
• B) an increase in the amount of goods and services demanded due to the real balance effect.
• C) an increase in exports due to the international substitution effect.
• D) a reduction in the supply of loanable funds and an increase in the interest rate.

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Definitions:

Public Good

An offering of products or services to every member of society at no cost, provided by either governmental bodies or private organizations, without aiming for financial gain.

Not Excludable

A characteristic of certain goods where it is not feasible to prevent individuals from consuming the good, such as public parks.

Not Rival

Refers to a good's characteristic where one person's consumption does not reduce the availability of the good for consumption by others.

Common Resources

Natural or man-made resources that are not owned by anyone, are available for use by more than one person, and can be depleted.