The "Wealth Effect" Refers to the Fact That When Aggregate

question 2

Multiple Choice

The "wealth effect" refers to the fact that when aggregate price levels rise:

• A) exports decline.
• B) firms cut back on their investments.
• C) the real value of savings accounts, bonds, and cash declines.
• D) interest rates tend to rise.

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Definitions:

Cost of Goods Sold

The direct costs attributable to the production of the goods sold in a company, including materials and labor.

Property, Plant, & Equipment

Long-term tangible assets that are used in the operation of a business and are expected to be used over more than one fiscal year.

Goodwill

An intangible asset that represents the excess of the purchase price over the fair market value of an acquired business's identifiable net assets.

Net Income

The total earnings of a company after all expenses and taxes have been deducted from total revenue, indicating the company’s profitability over a specific time period.