According to the wealth effect, a decrease in the average price level increases the purchasing power of people's cash and checking account balances, and therefore makes people richer so they will purchase more goods and services.

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The wealth effect posits that when the average price level falls, the real value of money increases, which can make consumers feel wealthier and more likely to spend, thus increasing consumption of goods and services.

According to the Wealth Effect, a Decrease in the Average