A change in wealth induced by a change in the price level is shown as a
A)movement along the aggregate demand curve.
B)movement along the aggregate demand curve due to substitution effects.
C)shift of the aggregate demand curve due to substitution effects.
D)shift of the aggregate demand curve due to the wealth effect.
E)movement along the aggregate supply curve.

Question

Quizplus · Accepted Answer

A change in wealth induced by a change in the price level would cause movement along the aggregate demand curve as individuals and businesses adjust their spending decisions based on changes in the relative prices of goods and services. The wealth effect is not typically significant enough to cause a shift in the aggregate demand curve.

A Change in Wealth Induced by a Change in the Price