The Wealth Effect Helps Explain the Slope of the Aggregate-Demand

question 178

Multiple Choice

The wealth effect helps explain the slope of the aggregate-demand curve.This effect is

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

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Definitions:

Discriminative Stimulus

A stimulus in the presence of which a particular response will produce reinforcement or a specific outcome, but will not do so in its absence.

Reinforcer

Any stimulus that strengthens or increases the probability of a specific response or behavior by providing a consequence an individual finds rewarding.

Operant Conditioning

A method of learning that occurs through rewards and punishments for behavior, influencing the likelihood of that behavior being repeated.

Pavlovian Conditioning

A form of learning in which a neutral stimulus comes to elicit a response after being paired with a stimulus that naturally brings about that response.