The wealth effect is
A. the result of wealthy people increasing the savings.
B. the increase in savings and consumption resulting from increases in residential house prices and gains in the stock markets.
C. the increase in the number of wealthy individuals in a country.
D. the result of large increases in the balance sheets of the banks.
B. the increase in savings and consumption resulting from increases in residential house prices and gains in the stock markets.
You might also like to view...
Which statement is false?
A. Under Soviet communism, government planning was substituted for the price mechanism. B. The entire Soviet economy was a Rube Goldberg contraption of subsidies, fixed prices, bureaucratic rules and regulations, special privilege, and outright corruption. C. Had Mikhail Gorbachev not begun dismantling the communist bureaucracy, the Soviet system probably would have been able to continue carrying on business as usual for another century. D. None of the statements are false.
Mergers can sometimes be good for a market by allowing firms to take advantage of economies of scale.
Answer the following statement true (T) or false (F)
If you have been consuming large quantities of ice cream on a hot summer afternoon and you decide to refrain from any additional consumption, it can be concluded that
A. total utility has reached a maximum and the marginal utility of an additional drink would be zero. B. total utility has reached a minimum and the marginal utility of an additional drink would be large. C. total utility has reached a minimum and the marginal utility of an additional drink would be negative. D. total utility has reached a maximum and the marginal utility of an additional drink would be small.
Suppose a country has a current account surplus and that there is no intervention by finance ministries or central banks. This current account surplus indicates that the country has
A. a surplus in its financial account. B. the official reserve transactions balance is positive. C. the official reserve transactions balance is negative. D. a deficit in its financial account.