In the Context of Aggregate Demand and Aggregate Supply,the Wealth

question 43

Multiple Choice

In the context of aggregate demand and aggregate supply,the wealth effect refers to the idea that,when the price level decreases,the real wealth of households

• A)increases and as a result consumption spending increases.This effect contributes to the downward slope of the aggregate-demand curve.
• B)decreases and as a result consumption spending increases.This effect contributes to the upward slope of the aggregate-supply curve.
• C)increases and as a result households increase their money holdings;in turn,interest rates increase and investment spending decreases.This effect contributes to the downward slope of the aggregate-demand curve.
• D)decreases and as a result households increase their money holdings;in turn,interest rates increase and investment spending decreases.This effect contributes to the upward slope of the aggregate-supply curve.

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