The Real Wealth Effect Provides a Partial Explanation for Why

question 36

Multiple Choice

The real wealth effect provides a partial explanation for why the aggregate demand curve slopes downward.Which of the following statements best explains the real wealth effect?

• A)At a lower price level domestically produced items are relatively less expensive than foreign goods and therefore are in greater demand.
• B)At a lower price level the real interest rate tends to be lower,and thus the quantity of investment goods demanded is larger.
• C)At a lower price level consumers will buy less because of a reduction in the real money supply.
• D)At a lower price level the purchasing power of accumulated savings is larger,and thus consumers will purchase more goods.

---

Definitions:

LMC

Least Material Condition, a feature of size symbol that denotes the tolerance condition of a part when it contains the least amount of material within specified limits.

Feature of Size

Refers to any geometric characteristic of a part that includes a dimensional specification, such as diameter, length, or width.

Diameter

A straight line passing through the center of a circle or sphere and terminating at both circumferences, representing the widest distance across it.

Thickness

The dimension from one surface of an object to the opposite surface, measured perpendicular to the surfaces.