An Increase in the Relative Price of a Good Cannot

question 438

Multiple Choice

An increase in the relative price of a good cannot be caused by

• A) an increase in the nominal price of the good that is greater than the increase in the nominal price of the other good.
• B) a decrease in the nominal price of the good that is less than the decrease in the nominal price of the other good.
• C) a decrease in the nominal price of the other good while the price of the good itself remains constant.
• D) an increase in the nominal price of the other good while the price of the good itself remains constant.

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Definitions:

Classical Economists

Economists from the late 18th and early 19th centuries who focused on the development of concepts like supply and demand, and the invisible hand theory.

Market Economy

A type of economic system where supply and demand determine the production of goods and services with minimal government intervention.

Prices

The amount of money required to purchase a good or service, determined by factors like supply and demand, production costs, and competition.

Aggregate Demand

The total demand for all goods and services within an economy at various price levels, in a given time period.