QuestionJuly 19, 2025

The increase in the purchasing power of a given money income that occurs when the domestic price level falls refers to: the real balance effect the nominal balance effect. the international trade effect. the interest rate effect.

The increase in the purchasing power of a given money income that occurs when the domestic price level falls refers to: the real balance effect the nominal balance effect. the international trade effect. the interest rate effect.
The increase in the purchasing power of a given money income that occurs when the domestic price level falls refers to:
the real balance effect
the nominal balance effect.
the international trade effect.
the interest rate effect.

Solution
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Answer

the real balance effect Explanation 1. Identify the Effect The increase in purchasing power when the domestic price level falls is known as the **real balance effect**. This occurs because the real value of money increases, allowing consumers to purchase more goods and services.

Explanation

1. Identify the Effect<br /> The increase in purchasing power when the domestic price level falls is known as the **real balance effect**. This occurs because the real value of money increases, allowing consumers to purchase more goods and services.
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