A Fall in the Price Level Changes the Purchasing Power

question 115

Multiple Choice

A fall in the price level changes the purchasing power of money.This is relevant to the __________ effect.

• A) international trade
• B) real balance
• C) aggregate demand
• D) interest rate
• E) aggregate supply

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Definitions:

Interest Rate

The amount charged by a lender to a borrower for the use of assets, usually expressed as a percentage of the principal.

Bond's Principal

The face value of a bond, or the amount that the bond issuer agrees to repay the bondholder at the bond's maturity date.

Bank Interest

The amount paid to depositors for holding their money in a bank account, or the amount charged to borrowers for taking out a loan.

Annual Payments

Recurring payments made once a year, often related to loans, insurance premiums, or obligations.