A decrease in the price level decreases net wealth and increases consumption spending.

Question

Quizplus · Accepted Answer

A decrease in the price level typically increases net wealth since the purchasing power of money increases. This increase in net wealth may lead to a decrease in consumption spending as people might choose to save more. Conversely, an increase in price level may decrease net wealth and increase consumption spending as people may choose to spend more before their money loses value.

A Decrease in the Price Level Decreases Net Wealth and Increases