The Real Balances Effect Predicts That Higher Prices

question 63

Multiple Choice

The real balances effect predicts that higher prices:

• A) make people worse off by reducing the value of their wealth, leading them to save more and spend less.
• B) make people worse off by reducing the value of their wealth, leading them to save less and spend more.
• C) make people better off by increasing the value of their wealth, leading them to save less and spend more.
• D) increase borrowing, leading to higher interest rates and less investment.
• E) make domestic goods relatively more expensive, increasing the demand for domestic goods and decreasing the demand for foreign goods.

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Definitions:

Psychosocial Conflict

In Erikson's theory, a crisis or challenge affecting the social and psychological aspects of one's life at different stages of development.

Erikson

Refers to Erik Erikson, a psychoanalyst known for his theory on the psychosocial development of humans, suggesting that individuals go through eight stages from infancy to adulthood, with each stage presenting a unique challenge or crisis.

Industrious

Describes a person who is hardworking, diligent, and persistent in their efforts, often leading to productive outcomes.

Industrious

Characterized by hard work, diligence, and a strong work ethic.