Asked by
Angela Santoyo
on Oct 13, 2024
Verified
Which of the following statements is an example of the wealth effect?
A) If people feel wealthier because their stock portfolios have risen,they tend to increase their consumption of goods and services.
B) One of the many factors that caused the Great Depression was that by 1930 the market for consumer durables was saturated.
C) When wealthy people expect a recession they tend to postpone major purchases until times get better.
D) When people expect inflation they often buy consumer durables before prices go up.
Wealth Effect
The change in spending that accompanies a change in perceived wealth, usually referring to the increase in consumer spending following an increase in asset values.
Consumption
The use of goods and services by households, constituting one of the primary components of aggregate demand in an economy.
Great Depression
A severe worldwide economic depression that took place mostly during the 1930s, beginning in the United States.
- Detail the notions underpinning visible spending and the consequences of financial prosperity.
Verified Answer
JL
Learning Objectives
- Detail the notions underpinning visible spending and the consequences of financial prosperity.