Which of the following best illustrates the wealth effect?
A) Jacob saved $25,000, which he put in the stock market. The market suddenly did very well, and though Jacob is not yet aware of it, his stock portfolio value rose to $36,000.
B) Simon felt he needed at least $800,000 to retire comfortably. He increased his savings to build up his wealth.
C) The Jones family has $50,000 in a bank. Prices in the market rose dramatically, diminishing their purchasing power by $50,000.
D) Margaret had her savings in Treasury bonds. She thought that stocks might offer her a better opportunity to increase her wealth, so she sold her bonds to buy stocks.

Question

Quizplus · Accepted Answer

The Answer of Which of the following best illustrates the wealth effect?
A) Jacob saved $25,000, which he put in the stock market. The market suddenly did very well, and though Jacob is not yet aware of it, his stock portfolio value rose to $36,000.
B) Simon felt he needed at least $800,000 to retire comfortably. He increased his savings to build up his wealth.
C) The Jones family has $50,000 in a bank. Prices in the market rose dramatically, diminishing their purchasing power by $50,000.
D) Margaret had her savings in Treasury bonds. She thought that stocks might offer her a better opportunity to increase her wealth, so she sold her bonds to buy stocks.

Which of the Following Best Illustrates the Wealth Effect