According to the Wealth Effect, If Real Wealth Decreases Then

question 297

Multiple Choice

According to the wealth effect, if real wealth decreases then people

• A) decrease their consumption expenditure.
• B) increase their consumption expenditure.
• C) do not respond if their nominal wealth does not change.
• D) decrease their consumption expenditure only if their nominal wealth also decreases.

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Definitions:

Certificates of Deposit

Fixed-term financial instruments issued by banks that offer a fixed interest rate in exchange for keeping the deposit untouched for a predetermined period.

Orders to Pay

Instructions typically issued by a debtor authorizing their bank to pay a specified amount of money to a creditor on a certain date.

Certificate of Deposit

A Certificate of Deposit is a financial product offered by banks that provides an interest rate premium in exchange for the customer agreeing to leave a lump-sum deposit untouched for a predetermined period of time.

Bank

A financial institution licensed to receive deposits, offer loans, and provide various financial services to its customers.