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

Question

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

Quizplus · Accepted Answer

The wealth effect will increase aggregate demand, which will shift the AD curve to the right. This will move the economy to point C.

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