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.

Understand how rational decisions are made by weighing marginal benefits against marginal costs.

Grasp the impact of incentives on individual and economic choices.

Understand the fundamental role of utilities in economic theory.

Acknowledge that using resources for one purpose reduces their availability for other purposes.

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Definitions:

Drumlins

Elongated hills formed by glacial ice acting on underlying debris, oriented in the direction of ice movement.

Loess

A fine, wind-deposited sediment that forms fertile soil, typically found in prairie regions.

Glaciers

Large masses of ice on land that move slowly over time, formed by the accumulation and compaction of snow, significantly influencing landscapes through erosion and deposition.

Glaciers

Large, slow-moving masses of ice formed from compacted layers of snow, which move under their weight and shape the land beneath.