What Does the Real-Balances Effect Mean

question 54

Multiple Choice

What does the real-balances effect mean?

• A)A higher price level will lead to an increase in the rate of interest,thereby causing a decrease in consumption.
• B)A lower price level will lead to an increase in the rate of interest,thereby causing a decrease in consumption.
• C)A higher price will increase the real value of financial assets,thereby causing an increase in consumption.
• D)A higher price will decrease the real value of financial assets,thereby causing an increase in consumption.
• E)A higher price will decrease the real value of financial assets,thereby causing a decrease in consumption.

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