According to the Real-Balance Effect, an Increase in the Price

question 124

Multiple Choice

According to the real-balance effect, an increase in the price level will

• A) leave total planned real expenditures unchanged since the price level of all goods has increased.
• B) decrease total planned real expenditures because of an increase in interest rates.
• C) lead to a corresponding increase in total planned real expenditures since businesses are now earning higher profits.
• D) decrease total planned real expenditures as a result of a decrease in the real value of money balances.

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Definitions:

Michael Messner

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