According to the wealth effect, if real wealth decreases then people
A) decrease their consumption expenditure.
B) increase their consumption expenditure.
C) do not respond if their nominal wealth does not change.
D) decrease their consumption expenditure only if their nominal wealth also decreases.
A
You might also like to view...
The term "unemployment" is best described as the total number of
A) adults who are looking for work but have not found a job. B) people not working. C) adults who work fewer hours than they wish to work. D) people who have been laid off and have stopped looking for work.
Tax policies involving increases in taxes paid by the private sector
(a) are generally tolerated when incomes are rising faster than taxes. (b) are always opposed by the private sector. (c) are death to politicians concerned about re-election. (d) are progressive when the lowest income bracket pays the highest percentage of total income.
Most economists believe that substitution behavior by consumers causes inflation measured by the Consumer Price Index (CPI) to overstate the true rate of inflation
a. True b. False
Which of the following explains why the U.S. poverty threshold increased from $3,000 per year in 1963 to $25,000 per year in 2017?
A. The government has become more benevolent than it was in 1963. B. Inflation has caused the price for basic necessities to increase since 1963. C. Americans are more spoiled now than they were in 1963. D. The threshold includes more luxury items now than it did in 1963.