If the average price level decreases,

what happens to the real output?

A. It remains the same.

B. It decreases.

C. It increases.

D. It has no impact from the price.

Question

Advanced Placement (AP)

Rowan Farrell

17 May, 21:35

If the average price level decreases,

what happens to the real output?

A. It remains the same.

B. It decreases.

C. It increases.

D. It has no impact from the price.

+4

Answers (1)

Know the Answer?

Steven Oliver · Answer 1

The intuition behind the real wealth effect is that when the price level decreases, it takes less money to buy goods and services. The money you have is now worth more and you feel wealthier. So, in response to a decrease in the price level, real GDP will increase.

If the average price level decreases,what happens to the real output?A. It remains the same.B. It decreases.C. It increases.D. It has no impact from the price.

If the average price level decreases,

what happens to the real output?

A. It remains the same.

B. It decreases.

C. It increases.

D. It has no impact from the price.