The Wealth Effect Helps Explain the Downward Slope of the Aggregate

question 134

Multiple Choice

The wealth effect helps explain the downward slope of the aggregate demand curve. How important is this effect and why?

• A)relatively important in Canada because expenditures on consumer durables is very responsive to changes in wealth
• B)relatively important in Canada because consumption spending is a large part of GDP
• C)relatively unimportant in Canada because money holdings are a small part of consumer wealth
• D)relatively unimportant in Canada because it takes a large change in wealth to make a significant change in interest rates

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