According to the Wealth Effect, an Increase in the Price

question 388

Multiple Choice

According to the wealth effect, an increase in the price level real wealth and _ consumption expenditure.

• A) increases; increases
• B) decreases; increases
• C) decreases; decreases
• D) increases; decreases

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Definitions:

Face Amount

The nominal value or principal amount of a security stated by the issuer, due to be paid at maturity.

Straight-Line Method

A method of calculating depreciation of an asset, which spreads the cost of the asset evenly over its useful life.

Bond Premium

The amount by which the market price of a bond exceeds its principal amount or face value.

Discount on Bonds Payable

The gap between a bond's face value and its market selling price, occurring when the bond sells below its nominal value.