A Decrease in the Price Level Will Have a Direct

question 107

Multiple Choice

A decrease in the price level will have a direct effect on spending because

• A)people like to spend less when prices are lower.
• B)the real value of the money people have varies directly with the price level,and so does their spending.
• C)the real value of the money people have increases and they can buy more with it.
• D)the more money they have the more it is worth and the more goods and services they can buy.

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Definitions:

Cheap

Describes goods or services that are available at a low cost, making them easily affordable.

Paradox

A statement or proposition that, despite sound reasoning from acceptable premises, leads to a conclusion that seems logically unacceptable or self-contradictory.

Elasticity

A measure of how much the quantity demanded or supplied of a good changes in response to a change in its price or other economic factors.

Demand

The desire of purchasers, consumers, or clients for a particular good or service, coupled with the ability and willingness to pay for it.