The wealth effect:
A)explains the downward-sloping aggregate demand curve.
B)explains the upward-sloping aggregate demand curve.
C)explains the downward-sloping aggregate supply curve.
D)explains the upward-sloping aggregate supply curve.

Question

Quizplus · Accepted Answer

The wealth effect is the tendency of consumers to increase their consumption as the value of their assets, such as stocks and real estate, increases. This results in a downward-sloping aggregate demand curve, as consumers demand more goods and services at higher prices when they feel wealthier.

The Wealth Effect