The "wealth effect" refers to the fact that when aggregate price levels rise:
A) exports decline.
B) firms cut back on their investments.
C) the real value of savings accounts, bonds, and cash declines.
D) interest rates tend to rise.

Question

Quizplus · Accepted Answer

The wealth effect describes how an increase in aggregate price levels reduces the real value of money, savings, and other financial assets, leading to decreased consumer spending.

The "Wealth Effect" Refers to the Fact That When Aggregate