According to the wealth effect, if real wealth decreases then people
A)decrease their consumption expenditure only if their nominal wealth also decreases.
B)do not respond if their nominal wealth does not change.
C)decrease their consumption expenditure.
D)increase their consumption expenditure.

Question

Quizplus · Accepted Answer

The wealth effect suggests that when real wealth decreases, people feel poorer and thus reduce their consumption expenditure.

According to the Wealth Effect, If Real Wealth Decreases Then