What Is One Implication of the Real-Balance Effect

question 17

Multiple Choice

What is one implication of the real-balance effect?

• A) The part of your wealth that you hold in the form of cash loses some of its value as the price level rises.
• B) When the price level rises, people have an incentive to work harder in order to earn a higher income.
• C) When the price level falls, most consumers reallocate their spending so as to have an equal balance between necessities and luxuries.
• D) Aggregate demand and aggregate supply can never reach long-run equilibrium.

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Definitions:

Systolic Blood Pressure

The pressure in the arteries when the heart beats, representing the maximum arterial pressure during contraction of the left ventricle of the heart.

Stethoscope

A medical instrument used to listen to sounds within the body, particularly the heart and lungs, commonly used in physical examinations.

Electronic Digital

Pertains to devices or systems that use digital technology and electronics to function, often found in computing, communications, and diagnostics.

Brachial Artery

A major blood vessel of the upper arm that supplies blood to the arm and hand.