A Rise in the Price Level Has a Direct Effect

question 94

Multiple Choice

A rise in the price level has a direct effect on spending because

• A) people like to spend more when prices are higher.
• B) the real value of the money people have varies directly with the price level.
• C) the real value of the money people have decreases and they can buy less with it.
• D) a higher price gives people more money, and so the more goods and services they can buy.

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Definitions:

Pension Plans

Financial programs established by employers or governments to provide income to employees after retirement.

Corporate Restructuring

The process of reorganizing the structure of a corporation to increase profitability, efficiency, or adapt to a changing environment.

Demotion

A reduction in rank, position, or status of an employee within an organization.

Reducing Headcount

A strategy used by businesses to lower expenses by decreasing the number of employees through layoffs, attrition, or retirements.