Question

A fall in the price level: Multiple Choice reduces the value of money in peoples' pockets, so people buy more goods. increases the value of money in peoples' pockets, so people buy less goods. reduces the value of money in peoples' pockets, so people buy less goods. increases the value of money in peoples' pockets, so people buy more goods.

Answer 1

Answer:

Option D; INCREASES THE VALUE OF MONEY IN PEOPLES' POCKETS, SO PEOPLE BUY MORE GOODS.

Explanation:

Price level refers to the price or cost of a good, service, or security in the economy.

For a given amount of money, a lower price level provides more purchasing power per unit of currency. When the price level falls, consumers are wealthier, a condition which induces more consumer spending. Thus, a drop in the price level induces consumers to spend more, thereby increasing the aggregate demand.

Therefore, a fall in the price level increases the value of money in peoples' pockets, so people buy more goods.