A Reason Why an Increase in the Price Level Decreases

question 262

Multiple Choice

A reason why an increase in the price level decreases the quantity of real GDP demanded is that

• A)the buying power of money increases.
• B)the real interest rate falls.
• C)the price of domestic goods and services increases relative to foreign goods and services.
• D)the inflation rate decreases.
• E)potential GDP decreases.

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Definitions:

Temporary Assistance

Financial aid provided on a short-term basis to individuals or families in need, often aimed at supporting basic needs like food, shelter, and healthcare.

Insurance Payment

A payment made to an insurance company which provides compensation for loss, damage, illness, or death in return for payment of a specified premium.

Circular-Flow Model

A diagram that visualizes the economy as consisting of households and firms interacting in the goods and services markets, and labor markets, showing how money flows through the economy.

Resource Market

A market in which households sell and firms buy resources or the services of resources.