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Advanced Placement (AP)Advanced Placement (AP)
18 September, 17:25

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.

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Answers (1)
  1. 18 September, 17:33
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    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.
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