-In the above figure, the economy is initially at point B. Then the price level falls by 10. The wealth effect will help
A) move the economy to point A.
B) move the economy to point C.
C) keep the economy to point B.
D) move the economy to point D.

Question

-In the above figure, the economy is initially at point B. Then the price level falls by 10. The wealth effect will help
A) move the economy to point A. 
B) move the economy to point C. 
C) keep the economy to point B. 
D) move the economy to point D.

Quizplus · Accepted Answer

The wealth effect suggests that as the price level falls, the real value of money increases, leading to higher consumer spending. This increased spending can shift the economy from point B to point A, where output is higher.

-In the Above Figure, the Economy Is Initially at Point