Increases in the Price Level Will

question 252

Multiple Choice

Increases in the price level will

• A)lower consumption because goods and services are less affordable.
• B)raise consumption because some goods and services are more affordable.
• C)raise consumption because real wealth increases.
• D)lower consumption because real wealth decreases.
• E)increase consumption because nominal interest rates will fall.

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Definitions:

Compounded Semiannually

The calculation of interest where the interest earned over a period is added to the principal, and the process is repeated twice a year.

Gross Debt Service Ratio

A financial ratio that compares an individual's monthly housing costs (including mortgage payments, property taxes, and utilities) to their gross monthly income, used by lenders to assess borrowing capacity.

Gross Monthly Income

The total amount of income earned in a month before taxes and deductions.

Compounded Monthly

Interest or returns on an investment are calculated and added to the principal amount every month.