An individual holds $10,000 in a checking account and the price level rises significantly. Hence
A) the individual's real wealth and consumption expenditure decrease.
B) the individual's real wealth decreases but real national wealth increases.
C) there is no change in the individual's real wealth.
D) the individual's real wealth increases.

Question

Quizplus · Accepted Answer

When the price level rises significantly, the purchasing power of the money held in the checking account decreases, leading to a decrease in the individual's real wealth. As real wealth decreases, consumption expenditure is likely to decrease as well, since the individual can afford to buy less with the same amount of money.

An Individual Holds $10,000 in a Checking Account and the Price