The so-called wealth effect will result in households:
A) Spending more and saving less
B) Spending less and saving more
C) Spending less and saving less
D) Spending more and saving more

Question

Quizplus · Accepted Answer

The wealth effect is the psychological phenomenon where individuals tend to increase their spending when the value of their assets, such as stocks or real estate, increase. This is because individuals may feel more financially secure and confident in their ability to spend. Therefore, the wealth effect will result in households spending more and saving less.

The So-Called Wealth Effect Will Result in Households