Other things the same,an increase in the price level induces less spending on
A)household consumption and investment.
B)household consumption,but not investment.
C)investment,but not household consumption.
D)neither investment nor household consumption.

Question

Other things the same,an increase in the price level induces less spending on
A)​household consumption and investment.
B)​household consumption,but not investment.
C)​investment,but not household consumption.
D)​neither investment nor household consumption.

Quizplus · Accepted Answer

An increase in the price level leads to a decrease in the purchasing power of money, which reduces household consumption as well as investment spending. Both are affected by inflation. Therefore, option A is the correct choice.

Other Things the Same,an Increase in the Price Level Induces