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.
D
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When box office receipts are not corrected for inflation,
a. The Sound of Music ranks as the most popular movie of all time. b. Gone with the Wind does not rank as one of the 50 most popular movies of all time. c. Titanic ranks as the most popular movie of all time. d. Avatar does not rank as one of the 50 most popular movies of all time.
Which of the following statements about economic growth is true?
What will be an ideal response?
In year 1 the price level is constant and the nominal rate of interest is 6 percent. But in year 2 the inflation rate is 3 percent. If the real rate of interest is to remain at the same level in year 2 as it was in year 1, then in year 2 the nominal
interest rate must: A. rise by 9 percentage points. B. rise by 3 percentage points. C. fall by 3 percentage points. D. rise by 6 percentage points.
Long-run aggregate supply is
A. the possible combinations of real GDP and inputs after full adjustments have been made. B. the extraction of natural resources. C. all of the physical and human resources in the economy. D. the real production of goods and services after full adjustments have been made.