As the price level rises, the purchasing power of households\' real wealth with

Question

As the price level rises, the purchasing power of households' real wealth with (remain the same/fall/ rise), causing the quantity of output demand to (rise/ fall/remain the same). This phenomenon is known as the (exchange rate/interest rate/wealth) effect.
Additionally, as the price level rises, the impact on the domestic interest rate will cause the real value of the dollar to (rise/fall) in foreign exchange markets. The number of domestic products purchased by foreign (exports) will therefore [rise/fall/remain the same], and the number of foreign products purchases by domestic consumers and firms(imports) will [rise/fall/remain the same]. Net exports will therefore [rise/fall/remain the same], causing the quantity of domestic output demanded to [rise/fall/ remain the same]. this phenomenon is known as the [exchange rate/ interest rate/wealth] effect.

Explanation / Answer

Question 1). Answer :- fall, fall and wealth effect.

Explanation :- With the rise in price level, Purchasing power of real wealth of households fall, resulting in fall in the quantity of output demanded in an economy. Such phenomenon is referred to as wealth effect.

Question 2). Answer :- rise, fall, rise, fall, fall and exchange rate effect.

Explanation :- The domestic interest causes real value of dollar to rise in international exchange market. Number of domestic products purchased by foreigners would fall and the number of foreign products purchased by domestic people would rise. Net exports would fall resulting in the quantity of output demanded to fall in an economy. Such phenomenon is referred to as exchange rate effect in economics.

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