Which of the Following Best Describes the Real Balances Effect

question 14

Multiple Choice

Which of the following best describes the real balances effect? As the price level rises,the real value of dollar-denominated assets:

• A)rises,which leads people to increase spending on normal goods and services
• B)rises,which leads people to decrease spending on normal goods and services
• C)falls,which leads people to increase spending on normal goods and services
• D)falls,which leads people to decrease spending on normal goods and services

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Definitions:

Plant/Equipment Investment

Capital expenditure on the physical assets of a company to increase its capacity or improve its efficiency.

Long-Term Forecasts

Predictions about future events or trends in an industry or organization that extend beyond the immediate future, typically several years ahead.

Standard Deviation

An indicator of the extent of differences or spread among a collection of numbers.

Posterior Communicating Arteries

Arteries that connect the posterior cerebral arteries with the internal carotid arteries and are part of the circle of Willis in the brain.