Which of the Following Correctly Describes How a Decrease in the Price

question 88

Multiple Choice

Which of the following correctly describes how a decrease in the price level affects consumption spending?

• A)A decrease in the price level raises real wealth, which causes consumption to increase.
• B)A decrease in the price level decreases the amount of money a household needs to buy goods and so raises the interest rate, which causes consumption to increase.
• C)A decrease in the price level increases the amount of money a household needs to buy goods and so raises the interest rate, which causes consumption to increase.
• D)A decrease in the price level lowers real wealth, which causes consumption to decrease.

Distinguish between short-run and long-run impacts of economic policies on unemployment and inflation.

Analyze the implications of changes in aggregate demand and aggregate supply on the economy.

Evaluate the role of expectations in shaping economic outcomes in the context of the Phillips curve.

Identify the factors that shift the Phillips curve and understand their implications.

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