When the price level changes, the quantity demanded must change in the opposite direction to maintain the same level of non-inflation-adjusted income. This is called
A)the substitution-of-foreign-goods effect.
B)the wealth effect or real-balances effect.
C)the constant nominal income effect.
D)long-run equilibrium.

Question

Quizplus · Accepted Answer

The constant nominal income effect states that when the price level changes, the quantity demanded must change in the opposite direction to maintain the same level of non-inflation-adjusted income.

When the Price Level Changes, the Quantity Demanded Must Change