Which of the Following Statements Best Describes the "Wealth Effect

question 19

Multiple Choice

Which of the following statements best describes the "wealth effect"?

• A)Households with equity in their houses are wealthier than households that rent their housing
• B)Expected appreciation in assets,such as home equity,may increase spending on other goods and services in the economy
• C)Economists believe that wealthier households have a positive effect on the housing market,while low-income households have a negative effect
• D)A 10 percent increase in homeownership is associated with a 12 percent increase in economic growth

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Definitions:

Unforeseen Difficulties

Challenges or complications that could not have been predicted or expected, often affecting the execution of plans or projects.

Past Consideration

A concept in contract law that refers to an act or benefit given prior to the promise being made, which therefore does not constitute valid consideration for a contract.

Stock Options

Financial derivatives that give the holder the right, but not the obligation, to buy or sell a stock at a predetermined price within a specific period.

Promissory Estoppel

A legal principle that prevents a party from backing out of a promise which led the other party to take action or abstain from it, based on the promise.