Ben N.Jerry prefers to keep his $10,000 retirement savings buried in the backyard.After an increase in the price level, Ben reduces the amount of goods and services he wants to purchase.Ben's rationalization, that now his retirement savings won't buy as much, is consistent with which explanation of the aggregate demand curve's negative slope?

Question

Quizplus · Accepted Answer

The real wealth effect suggests that as the price level increases, the purchasing power of wealth decreases, leading to a decrease in consumer spending and a leftward shift in the aggregate demand curve. Ben's behavior of reducing the amount of goods and services he wants to purchase due to a decrease in the purchasing power of his retirement savings is consistent with the real wealth effect.

Ben NJerry Prefers to Keep His $10,000 Retirement Savings Buried in in the Backyard.After