The wealth effect is another term for the
A) substitution effect.
B) indirect effect.
C) real-balance effect.
D) interest rate effect.

Question

Quizplus · Accepted Answer

The wealth effect refers to the change in consumer spending caused by a change in the value of assets, such as stocks or real estate, owned by households. As the value of these assets rises, households feel wealthier and may increase their spending, leading to increased economic activity. This effect is often seen as part of the broader real-balance effect, which describes how changes in the perceived value of assets and liabilities can affect consumer behavior.

The Wealth Effect Is Another Term for the