The Real-Balance Effect Implies That When

question 140

Multiple Choice

The real-balance effect implies that when

• A) the price level decreases, the value of money balances held by individuals, firms, government, and foreigners increases and spending decreases.
• B) the price level increases, the value of money balances held by individuals, firms, government, and foreigners increases and spending increases.
• C) the price level increases, the value of money balances held by individuals, firms, government, and foreigners decreases and spending decreases.
• D) the price level decreases, the value of money balances held by individuals, firms, government, and foreigners decreases and spending decreases.

---

Definitions:

Farm Productivity

The measure of output (usually in terms of yield or economic value) produced per unit of input (such as labor, land, or capital) in agricultural activities.

Nonfarm Sectors

Industries and activities not directly involved in agriculture, farming, or the raising of animals.

Demand

Describes the quantity of a product or service that consumers are willing and able to purchase at various price levels, at a given moment.

Supply

The total quantity of a good or service that is available for purchase at any given price point.