If other factors are held constant,an increase in the price level
A)causes the quantity of goods and services demanded to increase.
B)causes the quantity of goods and services demanded to fall.
C)causes the real value of the money to increase.
D)induces people to spend their money faster.

Question

Quizplus · Accepted Answer

When the price level increases, the purchasing power of money decreases, which in turn reduces the quantity of goods and services demanded. This is because people can afford to buy fewer goods and services with their limited income or resources. Therefore, the correct answer is B, which implies a fall in the quantity of goods and services demanded. The other options are incorrect because an increase in the price level does not cause an increase in the quantity of goods and services demanded (A) or the real value of money (C); neither does it induce people to spend their money faster (D).

If Other Factors Are Held Constant,an Increase in the Price