According to the Real-Balance Effect, an Increase in the Price

question 124

Multiple Choice

According to the real-balance effect, an increase in the price level will

• A) leave total planned real expenditures unchanged since the price level of all goods has increased.
• B) decrease total planned real expenditures because of an increase in interest rates.
• C) lead to a corresponding increase in total planned real expenditures since businesses are now earning higher profits.
• D) decrease total planned real expenditures as a result of a decrease in the real value of money balances.

---

Definitions:

Canceled Check

A check that has been paid or cleared by the bank it was drawn on and thus is marked as "canceled," making it no longer negotiable.

Journal

A record where all financial transactions are initially entered, which may later be posted to a ledger.

Company's Records

Company's records comprise all documents, books, papers, and financial statements that depict the business transactions and financial status of a company.

Credit Memo

A document issued by a seller to a buyer, reducing the amount that the buyer owes to the seller under the terms of an existing invoice.