Which of the Following Best Illustrates the Wealth Effect

question 263

Multiple Choice

Which of the following best illustrates the wealth effect?

• A) Jacob saved $25,000,which he put in the stock market.The market suddenly did very well,and though Jacob is not yet aware of it,his stock portfolio value rose to $36,000.
• B) Simon felt he needed at least $800,000 to retire comfortably.He increased his saving to build up his wealth.
• C) The Jones family has $50,000 in a bank.Price at the stores rose dramatically,so the purchasing power represented by that $50,000 diminished.
• D) Margaret had her savings in Treasury bonds.She thought that stocks might offer her a better opportunity to increase her wealth,so she sold her bonds to buy stocks.