The effect helps explain why an increase in the price level causes a decrease in

Question

The effect helps explain why an increase in the price level causes a decrease in real gross domestic product. money nominal interest rate export international trade In the short run, real GDP will decrease when the price level falls duo to: flexible input prices menu costs menu items money illusion money magic sticky input prices sticky output prices Which of the following scenarios will cause a higher price level m the long run? Of supplies are restricted for six months The value of the U.S. dollar increases The internet is widely adopted Consumer wealth increases due to a rise in housing prices

Explanation / Answer

Answer 1:

An increase in the price level will lead to the decline in the real money balances and thus decrease real GDP in the economy. So, the answer is money effect.

Answer 2:

Options chosen are correct.

Answer 3:

Option D. Increase in the wealth of the consumers will lead to increase in the consumption level as income rises and thus aggreaget demand will rise and thus price level rises.

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.