Question

A fall in the price level:____________.

A. reduces the value of money in peoples' pockets, so people buy less goods.
B. reduces the value of money in peoples' pockets, so people buy more goods.
C. increases the value of money in peoples' pockets, so people buy more goods.
D. increases the value of money in peoples' pockets, so people buy less goods.

Answer 1

Answer:

C. increases the value of money in peoples' pockets, so people buy more goods. 

Explanation:

If there is a general decline in price levels, there is a deflation.

When there's a fall in price, the same amount of money can buy more goods and services. Therefore, the value of money has increased and aggregate demand will increase.