When the Price Level Changes, the Quantity Demanded Must Change

question 21

Multiple Choice

When the price level changes, the quantity demanded must change in the opposite direction to maintain the same level of non-inflation-adjusted income. This is called

• A)the substitution-of-foreign-goods effect.
• B)the wealth effect or real-balances effect.
• C)the constant nominal income effect.
• D)long-run equilibrium.

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Definitions:

Frederick W. Taylor

An American mechanical engineer who is considered the father of scientific management, emphasizing efficiency, systematic study of tasks, and standardization of work practices.

Employers

Entities that hire and compensate individuals for their work and services.

Motion Study

A business efficiency technique that analyzes the motions involved in performing a task to design more efficient ways of working, thereby improving productivity.

Frank and Lillian Gilbreth

Pioneers in the field of industrial engineering, known for their studies of time and motion to improve workplace efficiency.