Why Does an Increase in the Price Level Cause a Decrease

question 208

Multiple Choice

Why does an increase in the price level cause a decrease in the aggregate quantity of goods and services demanded?

• A)because as wealth rises, interest rates rise, and the dollar appreciates
• B)because as wealth rises, interest rates fall, and the dollar depreciates
• C)because as wealth falls, interest rates rise, and the dollar appreciates
• D)because as wealth falls, interest rates fall, and the dollar depreciates

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Definitions:

Free-Rider Problem

A situation where individuals consume more than their fair share of a public resource, or shoulder less of the cost of its production, benefiting from a good without properly paying for it.

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Individuals who entertain the public in outdoor locations, often relying on voluntary donations for income.

Median Voter

A theoretical concept that represents the individual whose preferences are exactly in the middle of the set of all voters' preferences, often used in political science to predict the outcome of elections.

Median-Voter Model

A theoretical model suggesting that the preferred policy of the median voter will win the support of a majority in a democratic election, shaping political outcomes.