In explaining the downward-sloping aggregate demand curve, the wealth effect is:
a. When the price index falls, the real money supply falls, causing the real risk-free interest rate to fall, and the value of bonds (wealth) to rise.
b. When the price index falls, the real money supply falls, causing the real risk-free interest rate to rise, and the value of bonds (wealth) to rise.
c. When the price index falls, the real money supply rises, causing the real risk-free interest rate to fall, and the value of bonds (wealth) to rise.
d. When the price index falls, people become wealthy because they earn higher nominal incomes, and the price of everything they purchase is cheaper. Therefore, they are wealthier.
e. None of the above.
.C
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Use the following information to answer the next question.Maya purchases only three products; orange juice, prepared meals, and on-demand episodes of her favorite shows. Each week she purchases 2 bottles of orange juice, 14 prepared meals, and 8 on-demand episodes. The prices of bottles of orange juice, prepared meals, and on-demand episodes for four different years are shown in the table below.YearPrice of Orange JuicePrice of Prepared MealsPrice of On-Demand Episodes1$2$6$102$6$5$123$4$7$134$4$8$11How much will Maya spend per week in Year 1?
A. $210 B. $178 C. $208 D. $168
According to the graph shown, the government can restrict trade by imposing a quota of:
This graph demonstrates the domestic demand and supply for a good, as well as a quota and the world price for that good.
A. 350.
B. 900.
C. 1150.
D. 1500.
If a $50 increase in government spending causes a $250 increase in national income, the value of the income multiplier is
a. 5 b. 0.20 c. 0.80 d. 3 e. 10
Which of the following is true?
A) An outstanding credit card balance is an asset that adds to your personal wealth. B) Interest rates charged by credit card companies are generally high because the loans are unsecured. C) The power of compound interest benefits those with outstanding credit card balances. D) An unused balance on your credit card is like money in the bank.