Which of the following correctly describes how an increase in the price level affects consumption spending?
A)An increase in the price level raises real wealth,which causes consumption to increase.
B)An increase in the price level decreases the amount of money a household needs to buy goods and raises the interest rate,which causes consumption to increase.
C)An increase in the price level increases the amount of money a household needs to buy goods and raises the interest rate,which causes consumption to increase.
D)An increase in the price level lowers real wealth,which causes consumption to decrease.

Question

Quizplus · Accepted Answer

An increase in the price level lowers the purchasing power of money, making people able to buy fewer goods and services with the same amount of money. This decreases real wealth and consumption spending.

Which of the Following Correctly Describes How an Increase in the Price