According to the wealth effect, when the price level rises and other things remain the same,
A) real consumption expenditure increases.
B) real wealth decreases.
C) there is no change in real wealth.
D) real wealth increases.

Question

Quizplus · Accepted Answer

When the price level rises, the purchasing power of money decreases, leading to a decrease in real wealth, which can reduce consumption expenditure.

According to the Wealth Effect, When the Price Level Rises