What is the effect of an increase in the price level?
A)The real value of dollar-denominated assets will fall.
B)The aggregate expenditure line will shift upward.
C)The equilibrium level of output demanded will rise.
D)There will be downward movement along a particular aggregate demand curve.
E)The aggregate demand curve will shift rightward.

Question

Quizplus · Accepted Answer

An increase in the price level leads to a decrease in the purchasing power of money. This means that the real value of dollar-denominated assets will fall. For example, if the price level rises by 10%, the amount of goods and services that can be purchased with a dollar will decrease by the same amount. As a result, people who hold dollar-denominated assets, such as savings or bonds, will see the real value of their wealth decline.

What Is the Effect of an Increase in the Price