According to the Real Balances Effect,when the Price Level

question 7

Multiple Choice

According to the real balances effect,when the price level:

• A) Falls,cash is worth less and therefore people buy less.
• B) Falls,cash is worth more and therefore people buy more.
• C) Rises,cash is worth less and therefore people buy more.
• D) Rises,cash is worth more and therefore people buy less.

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Definitions:

Positive Externalities

Benefits that are enjoyed by a third-party or the society at large as a result of an economic activity.

Logrolling

The practice of exchanging favors, especially in politics by reciprocal voting for each other's proposed legislation.

Paradox Of Voting

A situation where individual rationality in voting may lead to outcomes that are not collectively optimal, such as the failure to elect the most preferred candidate due to vote splitting.

Median Voter Model

A theoretical model in political science that suggests policies will converge towards the preferences of the median voter in a majority rule voting system.