CFA Practice Question

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CFA Practice Question

If the price level rises, then real wealth ______, consumption ______, and aggregate demand ______.

A. decreases; decreases; decreases
B. increases; decreases; decreases
C. decreases; increases; increases
Correct Answer: A

User Contributed Comments 5

User Comment
JoeHoong I kind of disagree with aggregate demand falling when price level increases. I thought the aggregate demand curve will remain fixed with change in price level.

Isn't aggregate demand = aggregate demand curve?
jpducros JoeHoong, the aggregate demand curve will remain fix, but there will be a movement along the curve. A movement to the left, since price level consumption decrease and demand decrease.
tankdan Question is kinda of sketchy...real GDP decreases...
gill15 No. there is NO movement along the AD curve here. Increase in Price Level is not the same as an increase in Price. Increase in Price level would cause money supply to decrease and therefor AD decreases and the others just follow from this.
Shaan23 Little confused here. The last question said Price Level does NOT cause a shift in AD.

Here price level increases, consumption decreases and therefor AD decreases. Here AD did shift due to a change in price level, at least indirectly.
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